Retail Investors’ Activity on Pleasant and Unpleasant Firms

51 Pages Posted: 15 Mar 2024

Date Written: September 1, 2023


This study investigates whether retail investors trade depending on a firm’s exposure to extreme temperatures as a proxy for physical climate risks. We define pleasant (P) and unpleasant hot (UH) and cold (UC) firms as those firms without and with exposure to such events. Retail trading in both pleasant and unpleasant firms is in the right direction on average, yet their trading in UC and UH firms weakens and strengthens their imbalances’ positive predictability for certain future returns. We document that while the performance of a trading strategy relying on UC firms is higher in the short run than that of P and UH firms, the P strategy outperforms in the long run. Retail order imbalances of UH and P firms also convey the most substantially positive effects on earnings surprises. Finally, retail investors’ activity in pleasant and unpleasant firms leads to comovement in their return and imbalance levels.

Keywords: Retail Investors; Pleasant Firm; Unpleasant Firm; Return Predictability

JEL Classification: G11, G12, G14, Q50

Suggested Citation

Finta, Marinela Adriana, Retail Investors’ Activity on Pleasant and Unpleasant Firms (September 1, 2023). Available at SSRN: or

Marinela Adriana Finta (Contact Author)

Singapore Management University ( email )

50 Stamford Road
Singapore, 178899

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