Document Type

Honors Project


Advisor: Liang Ding


This paper examines market efficiency surrounding hurricanes in the immediate post-landfall period. Using hypotheses derived from distinctions between the efficient market hypothesis and the adaptive market hypothesis, it runs event studies on a sample of gulf-exposed property and casualty insurers for hurricanes that made landfall domestically in the 2004 and 2005 hurricane seasons. Testing these post-landfall inefficiency measurements shows that a statistically significant window of inefficiency exists immediately following hurricane landfall. This confirms the prediction of the adaptive market hypothesis, and as a result shows that hurricanes create opportunities for abnormal risk-adjusted returns in this market.



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