The impact of natural disasters on the performance of the stock market: Case of the ASEAN 5

The occurrence of financial disasters is inevitable. Investors and companies should be aware how these disasters may affect business operations. Although the ASEAN is a calamity prone area, studies on the ASEAN countries and natural disasters and comparison between countries are limited among researchers. Focusing therefore on the ASEAN 5, this study explores the impact of natural disasters, specifically earthquakes and floods, on the performance of the stock market for the years 2000-2014 using ARGH/GARCH-M models. Generally, natural disasters do not have any significant impact on the market. However, the gaining from loss hypothesis of Shelor et al. (1992) was evident for most of the countries rather than suffering from loss from the disaster. Meanwhile, all countries except for the case of the Philippines showed a manifestation of risk return trade-off wherein higher risk leads to lower return