The impact of natural disasters on Philippine stock market: an analysis utilizing VAR and GARCH
Date
2023-07
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study investigates the relationships between natural disasters and the
Philippine stock market through the utilization of Vector Autoregression (VAR) and
Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models.
Through the GARCH analysis, we found that floods and droughts both have a
negative impact on the Industrials, Property, Services, and Mining and Oil Sectors.
The VAR model shows that drought has a negative impact on the closing price of the
mining and oil sector and storms have a positive effect on the closing price of the
property sector. As for the natural disaster’s effects on Macroeconomic factors, our
analysis shows that volcanic activity has a negative relationship with the exchange
rate and so does drought with the inflation rate. Our results suggest that any financial
decisions to be made that account for the volatility effects of natural disasters may be
done in consideration of the factors that have significant impacts on closing prices.
Description
Keywords
stock market, natural disaster, VAR, GARCH