Stock Prices in Insurance Industry After Hurricane Katrina

Effect of hurricane katrina on insurance industry stock prices Abstract This study tests the efficient market theory by measuring the effects of Hurricane Katrina, one of the most deadly and destructive natural disasters to occur in the United States, on stock prices in insurance industry. It hypothesizes that insurance providers who offer services in the areas affected by Hurricane Katrina should incur a loss in the market-price of their stock following the natural disaster. This event study analyzed fifteen publicly-traded major insurance providers and the risk-adjusted rate of return on their stock before and after the date of dissipation of the hurricane, observed as August 30th, 2005. Results show stock returns, although†¦show more content†¦The study tests how quickly the fifteeninsurance companies’ stock prices reacted to Hurricane Katrina leading up to and subsequent toAugust 30, 2005, which is observed as the date of dissipation. To test whether or not the hurricane had an effect on the insurance industry stock prices, observatio ns of the fifteen companies’ daily prices and the corresponding daily Samp;P 500 Index from one hundred eighty days prior to the event date, August 30, 2005, and thirty days subsequent to the date. To test the market efficiency theory in respect to Hurricane Katrina and to analyze the effect of the storm on stock prices leading up to and after the event, this study proposes the following null and alternate hypotheses: H10: The risk adjusted return of the stock price of the fifteen insurance companies is not significantly affected by the effects of Hurricane Katrina. H11: The risk adjusted return of the stock price of the fifteen insurance companies is significantly negatively affected by the effects of Hurricane Katrina H20: The risk adjusted return of the stock price of the fifteen insurance companies is not significantly affected by the effects of Hurricane Katrina and the event period. H21: The risk adjusted return of the stock price of the fifteen insurance companies is significantly negatively affected by the effects of Hurricane Katrina and the event period. This study uses the standard riskShow MoreRelatedIntroduction Of Katrina Vs. Sandy2040 Words   |  9 PagesIntroduction of Katrina vs. Sandy Natural disaster currently has become a large part of US economy, from tornadoes, fire, floods and hurricanes. These natural disasters have lead to death of people but also a billion dollar damage to several cities or states. 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