The Effects of the 2010 Chilean Natural Disasters on the Stock Market.

2014. Revista Estudios de Administración. Vol. 21, N 1, Pp 31-48.

Jose Ruiz V

Abstract:

The 2010 Chilean earthquake and tsunami were among the strongest in the world history. The exogeneity of these natural disasters provides the opportunity to test stock price reactions. Using a sample of 42 firms listed in the Santiago Stock Exchange, we develop an event study methodology considering heterogeneity in volatility. Chilean stock market volatility increased by 240% (120%) during the 5 (11) trading days after the earthquake. The results are informative about the behavior of the stock prices: returns are positive in sectors the retail, real estate, and banking sectors and negative in food, steel, and forestry. Insurance coverage decreases the impact on economic growth.

Palabras claves: Earthquake, natural disaster, stock returns, volatility.

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