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Temperature shocks and industry earnings news

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

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.

Suggested Citation

  • Addoum, Jawad M. & Ng, David T. & Ortiz-Bobea, Ariel, 2023. "Temperature shocks and industry earnings news," Journal of Financial Economics, Elsevier, vol. 150(1), pages 1-45.
    • Handle: RePEc:eee:jfinec:v:150:y:2023:i:1:p:1-45
    DOI: 10.1016/j.jfineco.2023.07.002
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    More about this item

    Keywords

    Climate shocks; Temperature extremes; Earnings predictability; Sell-side analysts; Stock returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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