Abstract
The effects of the Boxing Day tsunami on the world equity markets are investigated in this paper. In particular, this paper examines how the risks and returns of industry and market portfolios are altered as a result of the tsunami. The analysis includes countries that were directly or indirectly exposed to this catastrophe. Both parametric and non-parametric tests are employed to explore the relationship between equity stock returns and the tsunami, and the CAPM is utilised to assess the variation in systematic risks. Given that the literature in this area is at its earliest stage, we draw on economic theories of flooding. In this way, our results are consistent with that of the flooding literature, which would predict that the Boxing Day tsunami would have minimal effects on the risks and returns of equity markets. This paper documents that the tsunami was associated with few abnormal return changes and a general increase in the long-term systematic risk of the equity portfolios in the study.
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Notes
We attempted to collect data for Bangladesh and Kenya. Given the poor quality of these data, it was not possible to use them in our study. The poor quality is predominantly the result of the old technology that is used to store the data.
Note that we do not report the results of the Wald test in this paper.
Generally, when the reported non-parametric t-statistics are less (greater) than negative (positive) two, we conclude that the abnormal returns were negative (positive) on the day of the event. Note that this test provides only the direction of change; it does not inform us about the magnitude of change.
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Acknowledgments
Gemma Cascio, Gillian Martin, Lan Tran, Monica Polec, Ng Ngar Ling, Rohit Tharani, Catherine Romeo, Daniel Di Stefano, Daniel Torre, Naomi Wijeyesekera, Peter White, Pravna Appadoo, Ryan Hughes, Marcel Madalin and Simon Lan are the other researchers involved in this research project. An earlier version of this paper was presented at the RMIT Finance Seminar 2010 and the Asian Finance Association Conference 2011, and we wish to thank the participants (in particular, Richard Heaney, Sinclair Davidson, Tim Fry, Lisa Farell, Lurion De Mello, Alberto Posso, Imad Moosa, Cheng-Few Lee, and two anonymous reviewers) for their helpful comments and support. It is also important to recognise Tseen-Ling Khoo for her editorial support.
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Ramiah, V. Effects of the Boxing Day tsunami on the world capital markets. Rev Quant Finan Acc 40, 383–401 (2013). https://doi.org/10.1007/s11156-012-0286-z
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DOI: https://doi.org/10.1007/s11156-012-0286-z