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Effects of extreme temperature on the European equity market

Author

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  • Bellocca, Gian Pietro Enzo
  • Alessi, Lucia
  • Poncela Blanco, Maria Pilar
  • Ruiz Ortega, Esther

Abstract

The increasing frequency and severity of extreme temperatures are potential threats to financial stability. Indeed, physical risk related to these extreme phenomena can affect the whole financial system and, in particular, the equity market. In this study,we analyze the impact of extreme temperature exposure on firms' performance in Europe over the XXI century. We show that extreme temperatures can affect firms' profitability depending on their industry and the quarter of the year. Our results are of interest for both investors operating in the equity market and for regulators in charge of securing financial stability.

Suggested Citation

  • Bellocca, Gian Pietro Enzo & Alessi, Lucia & Poncela Blanco, Maria Pilar & Ruiz Ortega, Esther, 2023. "Effects of extreme temperature on the European equity market," DES - Working Papers. Statistics and Econometrics. WS 37973, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:37973
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    More about this item

    Keywords

    Climate Change;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • 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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