The Real Effects of Weather on Firm Performance, Analyst Forecasts, and Stock Prices

64 Pages Posted: 14 Jan 2022

See all articles by Marcus Kirk

Marcus Kirk

University of Florida - Fisher School of Accounting

Derrald Stice

The University of Hong Kong - School of Business

Han Stice

The Chinese University of Hong Kong

Date Written: January 12, 2022

Abstract

This paper examines the real effects of weather on firm performance, using temperature as our proxy for weather. The relation between temperature and performance depends on season, industry, geographic location, and is often firm-specific. Therefore, to test this relation we adapt a measure of firm-quarter-specific weather sensitivity to calculate the predicted effect of weather on quarterly firm sales (Weather Impact). We first document that future quarterly sales performance is partially predicted by our measure. We then show that our measure is associated with both analyst forecast accuracy and announcement period abnormal returns. Overall, our results suggest that market participants do not fully incorporate the predictable real effects of weather into their expectations of firm performance.

Keywords: Weather; Climate Change; Environmental Economics; Sales

JEL Classification: M41, F64, Q54

Suggested Citation

Kirk, Marcus and Stice, Derrald and Stice, Han, The Real Effects of Weather on Firm Performance, Analyst Forecasts, and Stock Prices (January 12, 2022). Available at SSRN: https://ssrn.com/abstract=4007090 or http://dx.doi.org/10.2139/ssrn.4007090

Marcus Kirk

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0222 (Phone)

Derrald Stice

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

Han Stice (Contact Author)

The Chinese University of Hong Kong ( email )

Shatin, N.T.
Hong Kong

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