Do earthquakes shake stock prices? Evidence from Turkey

Abstract

This study investigates the causal effect of the earthquake in Turkey on construction, transportation, and insurance stocks. The results reveal a significant negative impact on these stocks. This indicates that the earthquake induced a high level of uncertainty, resulting in a substantial negative influence on the stock market\'s value on a subsequent day. In addition, the results indicate that stocks are lower than expected without an earthquake. The point-wise causal effect refers to the variation between the expected and actual data, and it remains relatively stable near zero until the action is implemented, at which point it quickly decreases and then increases. In relative terms, the construction stock is more affected by the earthquake, followed by the transportation stock. The findings have important implications for investors and policymakers, highlighting the importance of preparing for natural disasters to reduce their negative impact on the stock market.