The Relationship Between Climate Risks and Stock Market Value

Abstract

The purpose of this paper is to examine the relationship between climate risk and stock market value in 9 countries. This research is quantitative in nature. The study utilized secondary data on an annual basis from 2000 to 2023, covering a period of 24 years. In addition, this paper uses the long-term equilibrium relationship test (Co-integration Test) was conducted using the Fixed Effect Panel Regression model. It was found that the drought index and the average annual policy interest rate have a statistically significant inverse relationship with the stock market value in all nine countries. As a consequence of such events and their respective effects, the Executive must take a good consideration of the adjustment of the policy interest rate with respect to drought problems, which will certainly affect the economy and the hope of the nation. Same with the regulatory agencies stock market in each country is conscious of the impact that the crisis could cause and have issued the policies of the proposed guideline is the settlement of the problem including the disclosure of information to restore confidence with the concerned parties.