Hurricanes as News? A Comparison of the Impact of Hurricanes on Stock Returns of Energy Companies

This is a working draft. Please do not cite. Recent hydro-meteorological disasters have sparked popular interest in climate change and on its role in driving these events. This paper focuses on the information provided by hurricanes in shaping public perceptions towards human-induced climate change. Because CO2 emissions from combustion are a sizeable contributor to greenhouse gas concentrations, and their reduction is a key ingredient in any climate change mitigation strategy, we focus on the energy sector. We estimate the impact of hurricanes on the stock returns of the largest energy companies in the US. We consider the most notorious, damaging hurricanes over the last 25 years: Sandy (2012), Katrina (2005), Andrew (1992), and Hugo (1989). We categorize energy companies into five groups according to CO2 intensity: coal, oil, natural gas, nuclear, and renewables. We find that the impacts of a given hurricane on the stock prices of energy companies differ by energy type. Compared to companies in the coal industry, companies in oil, natural gas and renewable energy industries all reveal significantly more positive cumulative average abnormal returns and the effect is the largest for renewables, followed by oil and natural gas. Similarly, the impacts of hurricanes on stock prices of energy companies differ by hurricane