scholarly journals Pricing Poseidon: Extreme Weather Uncertainty and Firm Return Dynamics

2021 ◽  
pp. 01-57
Author(s):  
Mathias S. Kruttli ◽  
◽  
Brigitte Roth Tran ◽  
Sumudu W. Watugala ◽  
◽  
...  

We present a framework to identify market responses to uncertainty faced by firms regarding both the potential incidence of extreme weather events and subsequent economic impact. Stock options of firms with establishments in forecast and realized hurricane landfall regions exhibit large increases in implied volatility, reflecting significant incidence uncertainty and long-lasting impact uncertainty. Comparing ex ante expected volatility to ex post realized volatility by analyzing volatility risk premia changes shows that investors significantly underestimate extreme weather uncertainty. After Hurricane Sandy, this underreaction diminishes and, consistent with Merton (1987), these increases in idiosyncratic volatility are associated with positive expected stock returns.

2019 ◽  
Vol 32 (2) ◽  
pp. 244-266
Author(s):  
Edimilson Costa Lucas ◽  
Wesley Mendes-Da-Silva ◽  
Gustavo Silva Araujo

Purpose Managing the risks associated to world food production is an important challenge for governments. A range of factors, among them extreme weather events, has threatened food production in recent years. The purpose of this paper is to analyse the impact of extreme rainfall events on the food industry in Brazil, a prominent player in this industry. Design/methodology/approach The authors use the AR-GARCH-GPD hybrid methodology to identify whether extreme rainfall affects the stock price of food companies. To do so, the authors collected the daily closing price of the 16 food industry companies listed on the Brazilian stock exchange (B3), in January 2015. Findings The results indicate that these events have a significant impact on stock returns: on more than half of the days immediately following the heavy rain that fell between 28 February 2005 and 30 December 2014, returns were significantly low, leading to average daily losses of 1.97 per cent. These results point to the relevance of the need for instruments to hedge against weather risk, particularly in the food industry. Originality/value Given that extreme weather events have been occurring more and more frequently, financial literature has documented attempts at assessing the economic impacts of weather changes. There is little research, however, into assessing the impacts of these events at corporate level.


2018 ◽  
Vol 05 (01) ◽  
pp. 1850002 ◽  
Author(s):  
Hildegaard Link ◽  
Chris Barrett

Risk management regimes develop as stakeholders attempt to reduce vulnerability to hazards and limit the damage and disruption from disasters. Urban coastal regions are often hotspots of climate change-related risks. Analysis of different characteristics of vulnerability, resilience, and transformation is an important precursor to planning and decision making. While these concepts are not new, in many areas they remain very abstract. This paper offers a method to assess vulnerability at the individual household scale in different New York City water front neighborhoods that were extensively damaged during hurricane Sandy in 2012. Household Surveys were conducted in Red Hook, Brooklyn and Edgemere/Arverne, Queens in early 2016. Survey results suggest that at the household level, feelings of preparedness and trust in local government’s ability to effectively manage and respond to extreme weather differ with the varying political/economic climates of each neighborhood. Our survey results also indicate that residents are changing their emergency planning behavior, regardless of politics or economics. Responses show residents adapting their thinking to acknowledge the potential for increasing risk from extreme weather events in both locations studied.


2020 ◽  
Vol 18 (5) ◽  
pp. 383-398
Author(s):  
Lynn Jiang, MD ◽  
Christopher M. Tedeschi, MD, MA

Background: In late 2012, Hurricane Sandy struck the eastern United States. Healthcare infrastructure in New York City—including long-term care facilities (LTCFs)—was affected significantly. The authors examined the impact of the storm on LTCFs 2 years after the event, using a qualitative approach consisting of a semistructured interview focused on preparedness and response. Important insights regarding preparedness and response may be lost by quantitative analysis or outcome measurement alone. During Sandy, individuals at LTCFs experienced the event in important subjective ways that, in aggregate, could lead to valuable insights about how facilities might mitigate future risks. The authors used data from a semistructured interview to generate hypotheses regarding the preparation and response of LTCFs. The interview tool was designed to help develop theories to explain why LTCF staff and administrators experienced the event in the way they did, and to use that data to inform future policy and research. Methods: Representatives from LTCFs located in a heavily affected area of New York City were approached for participation in a semistructured interview. Interviews were digitally recorded and transcribed. Recurrent themes were coded based on time period (before, during, or after the storm) and content. A grounded theory approach was used to identify important themes related to the participants’ experiences.Results: A total of 21 interviews were conducted. Several overarching themes were identified, including a perception that facilities had not prepared for an event of such magnitude, of inefficient communication and logistics during evacuation, and of lack of easily identifiable or appropriate resources after the event. Access to electrical power emerged as a key identifier of recovery for most facilities. The experience had a substantial psychological impact on LTCF staff regardless of whether they evacuated or sheltered in place during the storm.Conclusion: Representatives from LTCFs affected by Sandy experienced the preparation, response, and recovery phases of the event with a unique perspective. Their insights offer evidence which can be used to generate testable hypothesis regarding similar events in the future, and can inform policy makers and facility administrators alike as they prepare for extreme weather events in similar settings. Results specifically suggest that LTCFs develop plans which carefully address the unique qualities of extreme weather events, including communication with local officials, evacuation and transfer needs in geographic areas with multiple facilities, and plans for the safe transfer of residents. Emergency managers at LTCFs should consider electrical power needs with the understanding that in extreme weather events, power failures can be more protracted than in other types of emergencies.


2017 ◽  
Author(s):  
Matthew Lanfear ◽  
Abraham Lioui ◽  
Mark Siebert

2018 ◽  
Vol 95 ◽  
pp. 5-26 ◽  
Author(s):  
Peter Christoffersen ◽  
Xuhui (Nick) Pan

2014 ◽  
Vol 9 (4) ◽  
pp. 821 ◽  
Author(s):  
Sinan Küfeoğlu ◽  
Samuel Prittinen ◽  
Matti Lehtonen

CFA Digest ◽  
1997 ◽  
Vol 27 (1) ◽  
pp. 41-42
Author(s):  
Terence M. Lim

CFA Digest ◽  
2002 ◽  
Vol 32 (1) ◽  
pp. 52-53
Author(s):  
Johann U. de Villiers

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