Extreme Heat and Stock Market Activity

Jonathan Peillex (), Imane El Ouadghiri, Mathieu Gomes () and Jamil Jaballah
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Jonathan Peillex: ICD International Business School Paris, LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne
Imane El Ouadghiri: PULV - Pôle Universitaire Léonard de Vinci, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Mathieu Gomes: CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne
Jamil Jaballah: EESC-GEM Grenoble Ecole de Management

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Abstract: We aim to advance our understanding of the adverse effects of extreme temperatures by examining the extent to which high temperatures affect stock market activity. We address this question by analyzing the trading volumes on the French stock market on days when the weather in Paris is excessively hot over the period 1995-2019. Our empirical analyses show that, on average, trading volumes fall significantly (between 4 percent and 10 percent) when maximum daily temperatures exceed 30°C (86°F). The observed negative association is remarkably robust to a battery of alternative analyses such as bin tests, event studies, and time-series regressions controlling for any seasonal effects and financial market conditions. From a theoretical perspective, this study contributes to the literature on behavioral finance by demonstrating the existence of a "hot weather" effect on financial markets. It also offers important managerial and public policy implications.

Keywords: behavioral finance; global warming; high temperatures; market activity; trading volume (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-env
Note: View the original document on HAL open archive server: https://hal.science/hal-02935431
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Citations: View citations in EconPapers (6)

Published in Ecological Economics, 2021, 179, pp.106810. ⟨10.1016/j.ecolecon.2020.106810⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02935431

DOI: 10.1016/j.ecolecon.2020.106810

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