Natural Hazard Risk and the Effect on Future Stock Returns

This research studies the effect of regional natural hazard risk to expected rates of return. I construct a novel proxy to measure regional natural hazard risk for states in the U.S. To construct firm-specific natural hazard risk, I identify all U.S. states that are economically relevant to firms and link this to the state-specific risk. I find some evidence that regional natural hazard risk can positively predict cross-sectional stock returns, but the explanatory power is limited.