Stock returns and weather: The case of European listed energy firms (2020)
Share
Finance . 41(3): 51-92
Jean-Louis Bertrand, Miia Chabot
https://www.cairn.info/revue-finance-2020-3-page-51.htm?ref=doi
Summary
The influence of weather on stock markets has been mainly studied in the context of behavioral finance. Using a weather-extended CAPM applied to European energy companies, we show that weather information has little influence on returns and highlight significant market inefficiency due to a weather-lag effect. We find that the error between expected and observed returns decreases by an average of 20% when using the weather-extended CAPM compared to the traditional CAPM. With increasing climate variability, these results should encourage analysts to consider the impact of weather on stock returns of the 70% of weather-exposed firms.