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Abnormal temperature and retail investors’ trading behavior

Author

Listed:
  • Liu, Huajin
  • Zhang, Wei
  • Zhang, Xiaotao
  • Li, Donghui

Abstract

Growing attention is being directed toward the influence of climate risks on financial markets. This paper reveals that individual investors in the Chinese stock market have integrated climate risk into their investment decisions. Abnormally high temperatures stimulate individual investors' belief in global warming, which in turn affect their stock selection preferences. During periods of abnormally high local temperatures, we observe a shift in individual investors' assets from high-emission companies to low-emission companies. This behavior is driven by both firm valuations and ethical considerations, with evidence of synchronization between stock prices and investor actions.

Suggested Citation

  • Liu, Huajin & Zhang, Wei & Zhang, Xiaotao & Li, Donghui, 2023. "Abnormal temperature and retail investors’ trading behavior," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003161
    DOI: 10.1016/j.frl.2023.103944
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Yaojie & Song, Bingheng & He, Mengxi & Wang, Yudong, 2024. "Abnormal temperature and the cross-section of stock returns in China," International Review of Financial Analysis, Elsevier, vol. 94(C).

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