Temperature Shocks and Industry Earnings News

93 Pages Posted: 25 Nov 2019 Last revised: 9 Jan 2023

See all articles by Jawad M. Addoum

Jawad M. Addoum

Cornell SC Johnson College of Business

David T. Ng

Johnson College of Business

Ariel Ortiz-Bobea

Cornell University

Date Written: January 5, 2023

Abstract

Climate scientists project a rise in both average temperatures and the frequency of temperature extremes. We study how extreme temperatures affect companies' earnings 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, but earnings forecasts account for temperature effects by quarter-end in many, though not all, industries.

Keywords: climate shocks, temperature extremes, earnings predictability, sell-side analysts, stock returns

JEL Classification: G12, G14, Q54

Suggested Citation

Addoum, Jawad M. and Ng, David T. and Ortiz-Bobea, Ariel, Temperature Shocks and Industry Earnings News (January 5, 2023). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3480695 or http://dx.doi.org/10.2139/ssrn.3480695

Jawad M. Addoum (Contact Author)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

David T. Ng

Johnson College of Business ( email )

301G Warren Hall, Cornell University
Ithaca, NY 14850-1967
United States
6072550145 (Phone)

Ariel Ortiz-Bobea

Cornell University ( email )

Ithaca, NY
United States
(607) 255-0220 (Phone)

HOME PAGE: http://ortiz-bobea.dyson.cornell.edu

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