A study of impact of climate change on the U.S. stock market as exemplified by the NASDAQ 100 index constituents

Abstract

AbstractThis paper employs an innovative event study methodology to demonstrate the impact of climate change on the NASDAQ index from the unique perspective of extreme weather events. This is achieved through the application of the event study methodology to a total of 526 biological, climatic, geological, hydrological, and meteorological disasters of climate change occurring in the U.S. during the period of 2000–2019. The results of the study demonstrate that: ① it can be generally observed that the five dimensions of climate change have a significant impact on stock returns. ② Empirical evidence indicates that the impact of different climate change dimensions on the return rate of stocks from NASDAQ stocks varies. In contrast, the biological and hydrological dimensions have a significantly negative impact on the return rate of stocks from the NASDAQ index, while the climate dimension has a significantly positive impact on the return rate of stocks from the NASDAQ index. ③ From the perspective of time, the impact of the five dimensions of climate change on the stock yield exhibits certain non-linear characteristics. This can be observed in the phenomenon of shock reversal, which occurs before and after the event.