Impact of Disasters on Financial Markets

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ACKNOWLEDGEMENT

I would like to take this chance for thanking my research facilitator, friends & family for support they provided & their belief in me as well as guidance they provided without which I would have never been able to do this research.

DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, & this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with university.

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ABSTRACT

This research study is an attempt to explore the impact that disasters have on the financial markets. The physical barriers that once segregated countries from one another have been broken down with innovation that reduces communication costs, including most recently the advent of the Internet as well as improvements in shipping technology that has reduced transportation costs. The methodology that has been adopted in order to answer the research questions is the secondary methodology as well as event study methodology. The results of the research study suggests that the disasters have a negative impact ont eh financial markets.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

1.1. Background of the Study1

1.2. Aims and Objectives2

1.3. Research Questions3

1.4. Significance of the Study3

CHAPTER 02: LITERATURE REVIEW4

2.1. Financial Markets4

2.1.1. Banks5

2.1.2. Institutional investors6

2.2. Disasters7

2.2.1. Difference between Natural Disaster and Environmental Disaster7

2.2.2. Natural and Technological Hazards8

2.2.3. Natural Disasters and Long Term Growth10

2.3. Risks and Vulnerability11

2.4. The Impact of Disaster on Economic Growth12

2.5. Disasters and Financial Markets14

2.6. Impact of Disasters on Financial Markets18

2.6.1. The Analysis of Losses19

2.6.2. When the disaster occurs20

2.6.3. Honest communication24

CHAPTER 03: METHODOLOGY25

3.1. Introduction25

3.2. Research Method25

3.3. Event Study Methodology26

3.4. Secondary Data27

3.5. Literature Search27

3.6. Research Approach28

3.7. Data Analysis28

3.8. Ethical Concerns28

3.9. Limitations of Research30

3.10. Informed Consent30

3.11. Confidentiality31

3.12. Validity31

3.13. Reliability31

3.14. Conclusion32

CHAPTER 04: DISCUSSION AND ANALYSIS33

4.1. Introduction33

4.2. Secondary Research Analysis33

4.2.1. Impact of Natural Disasters in financial Markets of different Countries (Discussion)33

4.2.2. Example: Earthquake in Japan (Discussion)35

4.2.3. Infrastructure Destruction (Discussion)36

4.2.4. Disaster and Finanical Markets36

4.2.5. Impact on the Stock Market38

4.2.6. Impact on the Commodity Market39

4.3. Summary41

CHAPTER 05: CONCLUSION AND RECOMMENDATIONS43

5.1. Recommendations44

REFERENCES46

CHAPTER 01: INTRODUCTION

1.1. Background of the Study

Large disasters are ubiquitous phenomena with potentially large impacts on the population infrastructure and countries economy in general. Disasters divided into natural disaster and man-made disaster (Khalid and Kawai, 2003, pp. 131). Natural disasters can be earthquake, tsunami, flood, hurricane, volcanic eruptions etc. The most recent natural disaster was Japanese earthquake on 11th March 2011, which was a humanitarian disaster. Representative of man-made disasters are regional conflict and terrorism attacks and impacts are with varying degrees of destruction. The massive tragedy that Japan suffers extreme synthesizes the convergence of three crises (economic, development and the environment) we face (Scanlon, 2006, pp. 10).

The earthquake and tsunami-of-the unprecedented were obviously unpredictable natural disasters. But also, these disasters reflect the growing ecological fragility, based on fears about the environmental crisis is upon us (Rasmussen, 2004, Pp. 85). The nuclear emergency triggered nuclear plant in Fukushima is an extreme consequence of ...