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Natural disasters and market manipulation

  • Gonzaga University
  • Zhejiang Gongshang University

Research output: Contribution to journalArticlepeer-review

23 Scopus citations

Abstract

Natural disasters exacerbate swings in investor sentiment and information asymmetry. As such, we propose natural disasters enable more frequent and severe market manipulation. We test this proposition using the securities listed in the NYSE and NASDAQ, disaster data from the National Oceanic and Atmospheric Administration, and surveillance industry-provided manipulation data from SMARTS, Inc. The data indicate the frequency and severity of market manipulation increases during disaster periods. Community resilience, hazard mitigation programs, and operational location moderate the effect of natural disasters on manipulation. These effects are not mechanically driven by spikes in volatility in disaster-county months. These effects are more pronounced for certain industries, including agricultural, health, and manufacturing industries. Finally, these findings are robust to alternative proxies of manipulation and various model specifications that include but are not limited to using difference-in-differences analysis.

Original languageEnglish
Article number106883
JournalJournal of Banking and Finance
Volume153
DOIs
StatePublished - Aug 2023

Keywords

  • Market manipulation
  • Natural disasters

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