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Temperature and Precipitation Fluctuations |
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WIKI ANALYSIS
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This article describes a concept which could impact a variety of companies, countries or industries. To see what companies and articles reference this concept page, click here. |
Droughts, hurricanes, and other drastic climate changes affect many businesses by either helping or harming their output. Usually, regionalized companies are harmed extensively should a natural disaster occur in their regions of operation.
Weather and the Industries
Weather fluctuations and severe climatic changes may hurt a few industries and help others. The overall production in the respective industries will change. Depending on the size of impact, the company’s performance on the stock market may reflect the weather fluctuation.
Companies or Industries harmed by severe weather
These include, but are not limited to:
- Any regionalized company whose region is afflicted by the weather.
- Industries whose resources depend solely on predictable weather, such as farming or grocery stores.
- Industries that rely extensively on large-scale transportation, such as oil and shipping industries.
- Insurance companies
Companies are Industries helped by severe weather
These include, but are not limited to:
- Construction Industry
- Steel, Iron, and other industries involved in the production of repair and construction resources.
- Companies that supply medicals.
Weather and The Stock Market
Climate catastrophes, such as strong hurricanes or tsunamis have immediate effect on the stock market. Investors usually react to such negative news by selling stocks, especially in companies thought to be affected the most. However, one notable exception is hurricane Katrina. While the hurricane was devastating parts of the US, stock markets continued to yield positive results. [1] In the end, the most prudent prediction of how a natural disaster could affect the stock market involves an analysis of how deeply the overall economy of the country is harmed.
Analysts have also observed a direct relationship between weather and the stock market. Stock markets tend to be significantly lower during summer and autumn months than they are during winter and spring. [2] Other research maintains that the NYSE index returns tend to be negative during cloudy days. [3] There is evidence that this relationship exists due to the malleable psychology of institutional investors, whose block trades move the market. [4]
Research on this topic has yet to converge towards one finding.
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