Extreme Temperatures and Firm-Level Stock Returns

Jingbin He and Xinru Ma
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Jingbin He: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Xinru Ma: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China

IJERPH, 2021, vol. 18, issue 4, 1-22

Abstract: By linking stock returns with weather conditions from 2007 to 2019 in China, we study how firm-level stock returns react to extreme temperatures. Based on a multivariate ordinary least squares regression model with fixed effects, empirical results show that firm-level stock returns decrease with exposure to extreme temperatures. We further explore the heterogeneity in the temperature-return relation to enrich our understanding of the economic mechanism behind it. The impact of extreme temperatures on abnormal stock returns is more pronounced in smaller, younger, more volatile, less profitable firms and firms with more intangible assets. The results indicate that the investor mood likely plays a role in the extreme temperature effect. The impact of extreme temperatures holds after addressing a series of concerns. Overall, our paper provides additional firm-level evidence on the environment-induced mood effect in the stock market.

Keywords: extreme temperature; stock return; investor mood (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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