The Impact of Earthquakes on the Japanese Stock Market

Mike Heinrich

Student thesis: Master thesis


This paper examines how major earthquakes impact the Japanese stock market and industries most vulnerable to the consequences of natural disasters. Using an event study methodology, this study investigates the impact of 117 earthquakes occurring from 1980 to 2023 on the whole market and the construction, insurance, transportation, food and real estate industries. The short-term abnormal returns are tested for significance using a parametric and a non-parametric test. The results indicate that, on average, earthquakes have a predominantly negative impact on the financial markets. However, the market reaction varies significantly across industries. While the insurance, food, and transportation industries are impacted negatively, the construction industry generates positive responses. In general, earthquakes causing higher economic damage generate a more pronounced market response. There is no difference in the response to low and high-fatality earthquakes or to recent and old earthquakes. Stronger earthquakes in terms of magnitude show a more substantial market reaction in the transportation industry.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2023
Number of pages85
SupervisorsMarcel Fischer