Nature's impact: Do extreme natural disasters influence retail investors?

IF 2.3 3区经济学 Q2 ECONOMICS

Journal of Economic Behavior & Organization Pub Date : 2025-03-03 DOI:10.1016/j.jebo.2025.106954

Mardy Chiah , Xiao Tian , Angel Zhong

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Abstract

This study investigates the influence of extreme natural disasters on the trading behaviour of retail investors, focusing on two significant events in Australia: Cyclone Debbie in 2017 and the Black Summer bushfires in 2019–2020. Utilising a unique dataset of transaction-level trade data, we examine whether retail investors exhibit a preference for trading stocks with Environmental, Social, and Governance (ESG) ratings during these periods. The findings reveal that retail investors significantly increase their trading activities in ESG-rated stocks (especially high ratings) in the aftermath of these disasters. This behaviour suggests a heightened awareness and preference for ESG performance among retail investors when faced with catastrophic events. In contrast, institutional investors do not show similar trading patterns, indicating a divergence in investment strategies between retail and institutional investors during times of heightened market uncertainty. Despite awareness concerning ESG during natural disasters, we find that ESG stocks heavily purchased by retail investors generate negative returns in the five-day window subsequent to the natural disasters.

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来源期刊

Journal of Economic Behavior & Organization ECONOMICS-

CiteScore

3.80

自引率

9.10%

发文量

392

期刊介绍： The Journal of Economic Behavior and Organization is devoted to theoretical and empirical research concerning economic decision, organization and behavior and to economic change in all its aspects. Its specific purposes are to foster an improved understanding of how human cognitive, computational and informational characteristics influence the working of economic organizations and market economies and how an economy structural features lead to various types of micro and macro behavior, to changing patterns of development and to institutional evolution. Research with these purposes that explore the interrelations of economics with other disciplines such as biology, psychology, law, anthropology, sociology and mathematics is particularly welcome.