Temperature shocks and industry earnings news

Jawad M. Addoum, David T. Ng and Ariel Ortiz-Bobea

Journal of Financial Economics, 2023, vol. 150, issue 1, 1-45

Abstract: Climate scientists project rising average temperatures and increasing frequency of temperature extremes. We study how extreme temperatures affect corporate profitability across different industries and whether sell-side analysts understand these relationships. We combine granular daily data on temperatures across the continental U.S. with locations of public companies’ establishments and build a panel of quarterly firm-level temperature exposures. Extreme temperatures significantly impact earnings in over 40% of industries, with bi-directional effects that harm some industries while others benefit. Analysts and investors do not immediately react to observable intra-quarter temperature shocks, though earnings forecasts account for temperature effects by quarter-end in many industries.

Keywords: Climate shocks; Temperature extremes; Earnings predictability; Sell-side analysts; Stock returns (search for similar items in EconPapers)
JEL-codes: G12 G14 Q54 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:150:y:2023:i:1:p:1-45

DOI: 10.1016/j.jfineco.2023.07.002

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