...Effect of hurricane katrina on insurance industry stock prices Abstract This study tests the efficient market theory by measuring the effects of Hurricane Katrina, one of the most deadly and destructive natural disasters to occur in the United States, on stock prices in insurance industry. It hypothesizes that insurance providers who offer services in the areas affected by Hurricane Katrina should incur a loss in the market-price of their stock following the natural disaster. This event study analyzed fifteen publicly-traded major insurance providers and the risk-adjusted rate of return on their stock before and after the date of dissipation of the hurricane, observed as August 30th, 2005. Results show stock returns, although dropping slightly after Hurricane Katrina, not having any measurable negative effect as a result of the storm. These results support the efficient market theory, as the insurance industry did not have any adverse effect from the devastation of Hurricane Katrina, allowing for no opportunity for abnormal return or avoidance of a loss. Appropriate statistical tests for significance conducted in this study show that Hurricane Katrina had no significant impact on the risk adjusted rate of return on selected insurance industry stock prices over the event study period. INTRODUCTION AND BACKGROUND Natural disasters have an opportunity to affect the stock market, but how soon subsequently to such events does the market react? Is it possible to avoid...
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...The Effects of a Hurricane on the Principles of Supply and Demand Econ 365 Jacob Owen The principles of supply and demand state that supply is the availability of a good or service desired by a consumer. Demand is a measure of the public’s desire for that good of service. As a rule of thumb, if something is very popular, or very necessary, it generally will be in high demand. The demand for a specific good or service can literally change overnight. Case in point when a hurricane enters the Gulf of Mexico, certain products become in high demand especially along the United States Gulf coast. Sudden increases in demand can have both positive and negative results for the producer as well as the consumer. Some of the products that will suddenly go into high demand are batteries, flashlights, gasoline, gas cans, canned food etc. With this sudden increase in demand, producers will likely order and stock more of these items than they normally would. This sudden change in demand makes the usual supply decrease. This results in the suppliers having to increase their production numbers. With a sudden increase in demand and decrease in supply this sometimes leads producers to increase their prices as a result. While the price increase is sometimes necessary to handle the sudden change in demand, some produces engage in “price gouging,” that is artificially inflating prices to take advantage of the increased demand which is highly illegal. Sometimes, when a hurricane...
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...warming is caused by many factors and has an impact on different spheres of our life. For example, climate science is aimed to investigate the changes caused by global warming. Geology examines the impact of human activities on climate. Economic science helps to understand economic benefits and material losses caused by severe weather conditions taking into account results obtained by climate science and Geology. Economic science inquiries into and develops measures to reduce negative impact of economic activity on climate and global warming. Taking into account the information mentioned above, it is evident that an interdisciplinary research is crucial, because one scientist is unable to solve the problem of global warming without any sort of collaborative effort with other disciplines. Natural disasters such: hurricanes and tornados are the result of global warming. In Recent years, hurricanes have become a great problem for many coastal villages and towns around the world. Scientists say that hurricanes are cause by heated water and variations of sea level. For example, according to Avery: “The computerized global climate models predict we’ll get more and bigger storms as the planet warms”, which results in severe weather conditions. Avery explains that “heat in the atmosphere is the fuel that leads to stormy weather, “and “weather disasters are occurring with ever greater...
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...August 25, 2005 Hurricane Katrina hit the Gulf Coast in New Orleans Louisiana, killing 1,836 people third deadliest hurricane in the United States history. A town that sits below sea level never stands a chance of levee embankment not able to withstand the overflow of a flood from a river. When New Orleans Louisiana was founded in construction of the levee along the river began, and more extensive levee was built as the city grew. The barriers were erected to prevent seasonal flooding. Katrina was formed in the Atlantic and had reach a Category 5 status, it was described as the worst disaster of all times, hurricanes are formed in the tropics and required consistent heat to exist. Many scientists believe that global warming was partially responsible for the massive force hurricane Katrina threw out. Although there is considerable argument over how climate change will affect certain ecosystem, it is still believed that climate change causes major shifts in the distribution and ecosystem species. After reviewing the Katrina hurricane situation scientists and engineers research its alignment with national needs, the National Hurricane Research Initiative (NHRI) concluded that the United States must be engaged in a research initiative to expand the understanding of hurricane and determine some more effective’s strategies for dealing with the issue. Presently hurricanes are not obsolete researchers need to understand the complexities between hurricanes and climate. Modern shields...
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...Hurricane Katrina was one of the deadliest and costliest hurricanes in the United States. Katrina made landfall as a category three hurricane on August 29, 2005. The initial landfall was made in the Gulf Region near Buras Louisiana and later at the Louisiana and Mississippi border at Bay St. Louis, Mississippi. Katrina packed sustained hurricane force winds of 125 mph, and extended out 75 miles from the eye of the storm (NOAA, 2012). Katrina’s damage was devastating to residents of the area affected. The causes and impact of hurricane Katrina were negative environmental, social, and economical effects on the Gulf Coast Region. A hurricane is a type of tropical cyclone or a low pressure system which forms in the tropics. It is a huge storm and is accompanied by thunderstorms. They can be as wide as 600 miles across and carry winds as high as 200 miles per hour. Hurricanes gather heat and energy from contact with warm ocean waters. The warmer the water is, the more intense the hurricane becomes. The storm surge caused by the hurricane which can be more than eighteen feet high causes flooding once it reaches land. Hurricanes range in categories one through five. A category one hurricane has winds of 74-95 miles per hour, and is considered to cause minimal damage. A category five storm has winds greater than 155 miles per hour, and the damage to expect is catastrophic. In 2001 FEMA (Federal Emergency Management Agency) released a report that listed three most likely catastrophic...
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...prices or how the cost of a barrel of crude oil has just gone up or down .10 cents. I also hear about how the current hurricane season could pose a threat to the oil industry, as it did last year with hurricane Katrina, putting oil refineries under water or causing extreme damage to them. In this essay I am going to discuss the shifts and price elasticity of supply and demand in the oil and gas industry. I am also going to discuss the oil and gas industry’s positive and negative externalities, wage inequality, and monetary and fiscal policies. Lastly, I will discuss the economic affects and influence on the oil and gas industry. Shifts and Price Elasticity of Supply and Demand The price elasticity is the affect of the price for a good on the demand of that good. If consumers are not affected by the change in price then this good would be referred to as inelastic. If consumers are affected by the change in price then this good would be referred to as elastic. The oil and gas industry is inelastic when the prices rise because, although consumers slightly reduce their consumption of oil and gas, consumers still purchase oil and gas. With gasoline prices in the U.S. approaching an average $3 a gallon, Americans are moaning about the rising cost, but so far they are resisting big changes in their gas-guzzling ways. The early results: High prices do have some effect, but prices would have to be higher than they are today -- and would have to stay high for a long time -- to meaningfully...
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...properties and destroy the social, economic and the cultural lives of people. Several events have happened currently around the world. The negative events in the world often cause much attention as compared to the positive events that occur around the world. The terrorists have often struck various cities in the world killing thousands of people and causing mass destruction of property (Vonk 860). The United States has been confronted with international terrorists especially the Al-Qaeda terror group. The September 2001 bombing of the twin towers was an example of the terrorist disaster in the United States. Then the stock and real estate collapse in the US economy. The massive tsunami in Japan was another major disaster that got a lot of public address by all the media channels. The earthquake also triggered the nuclear disasters in Japan. The most recent disaster in the U.S is the hurricane Sandy. Hurricane Sandy has caused unprecedented loss of lives and destruction to property in U.S. United States is currently battling from the deepest recession that occurred since the Great Depression. All these events have had much public attention from the media and discussion forums. Even though the negative events have been getting much attention, there are several positive events currently that are worthy receiving much media attention. NEGATIVE ISSUES IN US...
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...judgments. We also have to include appropriate probability concepts that will help limit uncertainty in certain decisions. This paper will disclose the decision to reside in the tri-state area with the probability of destructive hurricanes occurring. Next this paper will reveal concepts and the outcome from the statistical analysis that was used to determine the final decision and, the tradeoffs between accuracy and precision required by various probability concepts. As a final point, this paper will demonstrate the effects the decision had on the data provided and the decision that was ultimately made. Probability Concepts and Application Hurricane Sandy hit Atlantic City, New Jersey on October 29, 2012. A 900-mile wide storm, Sandy affected the entire northeastern United States with devastating winds, rain and floods. New Jersey and New York suffered the worst from the super storm leaving thousands of people without power for days. People living in this area were not prepared or expected the storm to devastate the area as it did leaving homes and personal belongings destroyed. So, what is the probability of New Jersey and New York becoming destroyed again by treacherous hurricanes such as Sandy? First we need to look at how often hurricanes of this nature occur in the tri-state area and the variables that contribute to them. According to "Think Progress" (2012), “A strong ridge of high pressure parked itself over Greenland beginning on October...
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...MGMT530 – Conference Decision Week 1 Case Analysis Template Katrina Johnson Management 530 Managerial Decision-Making 1) Define the decision problem? This case is about an Accounting System User’s Conference that was to be held in New Orleans, LA. However, due to Hurricane Katrina, the hotel is no longer able to accommodate the conference. Management must decide whether to move the conference to a different venue or change the dates to a later time, giving registrants’ limited notice. 2) What is the general nature of the problem? Competition for participants to take part in this conference is critical for customer retention, product development and product enhancements. Due to the magnitude of the destruction left in the wake of the hurricane, there is a strong likelihood that the conference will not be held. In addition, switching locations could possibly result in a loss of customers and the reputation of the hotel. 3) What event triggered the situation? Although Hurricane Katrina was the root cause of the dilemma, a natural disaster is a foreseeable event. Management should have had a backup plan in place, therefore the triggering event in my opinion is the lack of preparation on behalf of management, conference organizers, and hotel management. 4) What are the imposed constraints on the situation? As stated in the case, all attendees have prepaid their registration fees. They have to decide whether they want to still attend the...
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...certain degree, often cannot be prevented. For example, natural disasters may occur, which would deter any company’s forecast. Another environmental impediment could arise from economic unrest. In such a case there may be unregulated episodes of inflation or unemployment, which could be detrimental to a business’s clientele and overall output. Next, the effects of war can take a company’s forecast for a spin, especially because the beginning and duration of a war can very often be unpredictable and its results very negative. Weather conditions can be detrimental for a company in regards to output. For example, something as common as a snow storm can deter deliveries for a business that does deliveries. This event may in term mean the waste of certain products that the company was counting on delivering in order to make profit. Another example would be a bakery because in the case of snowstorm or flood, as we often experience in south Florida, it signifies the loss of a whole day’s profit. This can be especially bad when more severe weather conditions happen, such as hurricanes. In south Florida, for instance, when hurricanes happen they simply cannot be prevented and businesses do suffer because they...
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...opposing viewpoints about why this may be happening. Some believe that it occurs naturally and is a part of a normal cycle over time and it is not significantly affected by human activities. Others believe that human activities have profound effects on the warming of the Earth. The global warming hypothesis originated back in 1896 when Svante Arrhenius, a Swedish chemist, developed a theory that carbon dioxide emissions from the burning of fossil fuels would cause global temperatures to rise by trapping excess heat in the earth’s atmosphere. He understood that the earth’s climate is heated by a process known as the greenhouse effect. About half of the solar radiation reaching the earth is reflected back into space. The remainder is absorbed by land masses and oceans, warming the earth’s surface and atmosphere. This warming process radiates energy, most of which passes through the atmosphere and back into space. However, small amounts of greenhouse gases like water vapor and carbon dioxide convert some of this energy to heat and either absorb it or reflect it back to the earth’s surface. These heat trapping gases work like a greenhouse – sunlight passes through, but a certain amount of radiated heat remains trapped. The greenhouse effect plays an important role in preventing the planet from entering a never-ending ice-age. Without the greenhouse gases the earth’s temperature would fall by 60 degrees Fahrenheit. However some scientists believe that increasing greenhouse...
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...considerations ..............9 Subsequent events ........ 10 Internal control implications ................ 10 Questions ....................... 11 Accounting and disclosure implications of Hurricane Sandy Overview On October 29, 2012 Hurricane Sandy, one of the largest Atlantic hurricanes on record, came ashore in the U.S. When the storm made landfall it was no longer categorized as a hurricane (it was categorized as a post-tropical cyclone), which may affect companies' insurance claims. Hurricane Sandy caused wide-spread flooding and wind damage across the midAtlantic, including lower Manhattan. This resulted in prolonged power outages, disruption of public transportation, and gasoline shortages from Virginia to New Hampshire. The most severe damage and disruption occurred in New York and New Jersey. Hurricane Sandy is expected to be the second-costliest Atlantic hurricane in history, only surpassed by Hurricane Katrina in 2005. Many businesses were disrupted by Hurricane Sandy and its aftermath including the New York Stock Exchange, which was closed for two days. While not all-inclusive, this Dataline discusses several accounting and disclosurerelated matters companies may encounter in dealing with the financial reporting implications of Hurricane Sandy. Links to additional...
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...WTI-Brent Spread An Analysis of Factors That Influence Oil Price Differentials Yiming Huang Dongming Li Hanzheng Li Shihui Qian Fordham University Financial Econometrics I December 17, 2015 WTI-BRENT SPREAD 2 Contents Abstract ......................................................................................................................................................... 3 1 Introduction ........................................................................................................................................... 3 2 Factors ................................................................................................................................................... 4 2.1 Dependent Variable ....................................................................................................................... 4 2.2 Independent Variable .................................................................................................................... 5 2.2.1 Financial market variables ........................................................................................ 5 2.2.2 Economic Variables .................................................................................................. 7 2.2.3 Underlying Assets Variables..................................................................................... 7 2.2.4 Weather Variable .....................................................
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...Armageddon My Artefact (1) / My Newspaper article (1) Scientists, celebrities, and everyday people have been trying to understand the nature of global warming. Controversy is rampant and there is intense debate around the world on the subject. The most obvious thing that can be said about global warming is that the earth is getting warmer. Specifically, the temperatures near the surface of the earth and the temperatures in the ocean are rising. Since 1990, there have been 10 years that have been hotter than any others in recorded history. The greenhouse effect is said to be responsible for global warming. The greenhouse effect causes certain vapours and gases to form a sort of blanket that covers and warms the earth. Water vapour, methane, carbon dioxide, and several other trace gases make up this blanket. The greenhouse effect itself is not disputed. No controversy exists on this point because the greenhouse effect is recognized as an inherently beneficial process. If all the energy that struck the earth was reflected right back into space, no one could live on earth. This is what would happen without this blanket that is caused by acceptable levels of global warming. However, global warming is not all good. It can cause the earth's covering to increase in density. With a denser blanket over the earth, less of the heat is reflected back into space. This upsets the delicate balance between heat and cold that is usually maintained on earth. It traps more heat inside the...
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...US boarder it is clearly understandable why America would consider keeping a consistent eye on it. Much like a crocodile, if not kept aware of it could potentially become a fatal mistake. However, even with a nickname like El Cocodrillo, the country itself is a beautiful landmark in our world and still considered as such in today’s society. Because of its size and location, weather plays a big factor in everyday living especially during hurricane seasons. It regularly feels the woes and effects of numerous hurricanes (Cuba hurricanes.org). The storms destroy many livestock, crops and homes in the harsh weather conditions. The outer-bands of the hurricanes cause great damage as the combination of the wind and floods rip through the shores of Cuba (cuba hurricanes). Typically, hurricanes continue to grow as winds build up to speeds of 74-95 mph, putting the storm in category one for hurricanes (cuba hurricanes). However, hurricanes in the surrounding area of Cuba known to build up to wind speeds of up to 155 mph, placing the average hurricane between categories three and four (Cuba Hurricanes.org). Besides the weather, prior to the Revolution in the 1950’s, Cuba was considered amongst the greatest due to the countries infrastructure development (History of Cuba). With the aid of the US, Cuba thrived with new buildings, schools as well as an advanced health care program with top researchers from the US. After the war, the US maintained a military influence in Cuba called a temporary...
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