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High temperatures and household stock market participation

Author

Listed:
  • Gan, Hongwu
  • Lin, Chuan
  • Niu, Geng
  • Yang, Liuming
  • Zhou, Yang

Abstract

This study investigates the impact of high temperatures on household stock market participation. By leveraging regional variations in heat exposure, we demonstrate that households in U.S. counties with greater exposure to high temperatures are significantly less likely to participate in the stock market, both in terms of the likelihood of participation (extensive margin) and the proportion of their portfolio allocated to stocks (intensive margin). A decomposition of heat exposure further shows that this adverse effect is primarily driven by unexpected temperature shocks. We also show that increases in unemployment and health risks are key mechanisms driving this relationship. Furthermore, the adverse effects of high temperatures are more pronounced among households with lower socioeconomic status. Overall, our results highlight the important role of high temperatures, in particular unexpected temperature shocks, in shaping household investment decisions.

Suggested Citation

  • Gan, Hongwu & Lin, Chuan & Niu, Geng & Yang, Liuming & Zhou, Yang, 2026. "High temperatures and household stock market participation," Journal of Banking & Finance, Elsevier, vol. 190(C).
    • Handle: RePEc:eee:jbfina:v:190:y:2026:i:c:s0378426626001482
    DOI: 10.1016/j.jbankfin.2026.107774
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    Keywords

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    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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