Climate Events and Market Efficiency: An Event Study Analysis

<p dir="ltr">This paper investigates how financial markets react to climate events across the US, EU, and Asia from 2000–2025. Using an event study methodology on 250 high-severity events, I find that broad US indices show no significant reaction, but the US energy sector drops slightly (-6 bps, p < 0.001). EU markets show modest positive responses (+3 to +6 bps), while Asian markets respond heterogeneously. Although some effects are statistically significant, transaction costs outweigh them, supporting market efficiency while revealing sector-specific sensitivities. These findings highlight regional and sector differences in climate risk pricing and provide insights for investors, policymakers, and researchers in climate finance, ESG, and market efficiency.</p>