Research On Financial Risk Caused By Meteorological Disasters

In recent years, the occurrence of various types of unexpected meteorological disasters not only cause losses to the national economy, but also brought certain influence to the enterprises and investors. This paper mainly investigates the risk triggered by unexpected meteorological disasters to the financial market. Firstly, we employ a multifractal detrending moving average algorithm (MFDMA) to analyze the effect of unexpected climatic events that have occurred in the country and abroad on its whole stock market and various industries as well as the degree of long memory in different sectors. Moreover, combined with whether the meteorological disaster events can be predicted or not, we further investigate the effects of unpredictable meteorological disasters on the US and Chinese stock markets. In addition, we apply event analysis method to test the robustness of conclusion we obtained by using MFDMA method. Finally, we conduct a preliminary investigation to determine whether the fluctuations of financial markets caused by meteorological disasters are derived from the normal evolution of the financial system itself or not.The empirical results show that:Meteorological disasters that occurred in the country and abroad have significant effects on its whole stock market and various industries. Moreover, the influences of these disasters on its whole stock market and various industries are different. The same climatic event can have different effects on various industries, whereas different climatic events can have different effects on the same industry in China and US. The magnitude of the effect on each industry are not the same, the reason can be mainly attributed to the industry sensitivity of meteorological disasters. Meteorological disasters on the financial stock market negative influence is progressive to some extent, but the impact on the stock market risk is progressive and persistent certain. At the same time, unpredictable weather disasters enhance the singularity of majority industry but weaken the market efficiency, which is different from the financial risks caused by the general meteorological disasters. The impact of unpredictable meteorological disasters on the stock market is significantly higher than that of predictable meteorological disasters, and the degree of risk of the Chinese stock market in various industries affected by meteorological disasters is greater than that of the United States. The occurrence of meteorological disasters may trigger the volatility of stock markets. The source of volatility is mainly the meteorological disasters rather than the normal evolution of financial and stock markets. The occurrence of unpredictable and sustainable meteorological disasters may trigger huge volatility in financial markets and affect the financial markets.