[MERCon 2026] Impact of Cyclone Ditwah on the Colombo Stock Exchange (Practice)

Natural disasters inflict severe macroeconomic shocks on financial markets, yet frontier exchanges remain understudied. Using a classical event-study framework on 71,044 daily records for 289 CSE-listed stocks (February 2025 - February 2026), this paper examines how the Colombo Stock Exchange absorbed Cyclone Ditwah, which struck Sri Lanka on 28 November 2025, causing USD 4.1 billion in damages (~4\% of GDP), leading to CSE's worst weekly decline since November 2022. Market-model parameters estimated for 203 qualifying stocks across 19 sectors reveal three key findings: frontier markets do not absorb disaster shocks instantaneously, as losses accumulate over five trading days rather than on the landfall day; foreseeable disasters are partially priced in advance, with statistically significant pre-event losses confirming early investor repricing as meteorological warnings intensified; and aggregate market measures obscure sectoral heterogeneity. While the overall Cumulative Abnormal Return (CAR) of -2.57\% is statistically meaningful, only four sectors (Consumer Services, Insurance, Diversified Financials, and Utilities) show consistent, broad repricing supported by both parametric and non-parametric tests. These findings inform investors' pricing of disaster risk in frontier markets, policymakers designing sector-targeted stabilisation interventions, and researchers studying market efficiency under severe informational uncertainty.