Weather, Institutional Investors, and Earnings News
50 Pages Posted: 2 Apr 2021
Date Written: September 23, 2020
We examine how weather conditions near a firm’s major institutional investors affect stock market reactions to firms’ earnings announcements. We find that unpleasant weather experienced by institutional investors leads to more delayed market responses to earnings news. Moreover, unpleasant weather of institutional investors is associated with higher earnings announcement premium and lower contemporaneous trading volume. The influence of institutional investors’ weather is robust after controlling for New York City weather, extreme weather conditions, and firm headquarter weather. Additional cross-sectional evidence suggests that the strength of this weather effect is related to institutional investors’ trading behavior.
Keywords: Weather Condition, Institutional Investor, Earnings Announcement Premium, Post-earnings-announcement Drift
JEL Classification: G02, G14, G23, M41
Suggested Citation: Suggested Citation