Tornado activity,house prices,and stock returns |
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Affiliation: | 1. Shanghai Gold Exchange, China;2. School of Management, Fudan University, China;3. Department of Finance and Accounting, EBS Business School, Germany;4. Department of Management and Economics, University of Trento, Italy |
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Abstract: | In this paper we investigate the effects of tornado activity on house prices and stock returns in the US. First, using geo-referenced and metropolitan statistical area (MSA)-level data, we find tornado activity to be responsible for a significant drop in house prices. Spillover tornado effects between adjacent MSAs are also detected. Furthermore, our granular analysis provides evidence of tornadoes having a negative impact on stock returns. However, only two sectors seem to contribute to such a negative effect (i.e., consumer discretionary and telecommunications). In a macro-analysis, which relies on aggregate data for the South, West, Midwest and Northeast US regions, we then show that tornado activity generates a significant drop in house prices only in the South and Midwest. In these regions, tornadoes are also responsible for a drop in income. Tornado activity is finally found to positively (negatively) affect stock returns in the Midwest (South). If different sectors are examined, a more heterogeneous picture emerges. |
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Keywords: | E30 Q56 R20 Tornadoes House prices Stock returns |
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