Author: Adrian P. Galido, Ph.D., Marites A. Khanser, D.B.A.
Volume 22 Page54-63


This study examines the effect of earthquakes, tropical cyclones and volcanic eruptions on the
Philippine Stock Exchange index (PSEi) over the period 2 January 1985 to 30 December 2010. The
extant literature show varying results with respect to the “gaining from loss” hypothesis of Shelor,
Anderson, and Cross (1990, 1992). With a GARCH(2,2)-M specification, support for the “gaining
from loss” hypothesis was evident for earthquakes and tropical cyclones. Overall, disasters have
an insignificant effect on the market returns. Future researches are directed to use methodological
alternatives, consider other forms of disasters, and different level (sector or firm) of analyses.
Policymakers can consider including market movements in assessing the impact of natural disasters.
Investors can attempt to conceptualize disaster-based trading strategies.