“Extreme heat and stock market activity”, a research paper by Imane El Ouadghiri published in “Ecological Economics”

While the adverse effects of heatwaves on the health of vulnerable people and the productivity of outdoor workers have been well documented, we still knew little about their potential impact on investor activity. Are financial markets also suffering from the heat?

Imane El Ouadghiri is an associate professor at EMLV and member of the Finance Group of the De Vinci Research Center – DVRC, the Pole Leonard de Vinci’s research organisation.

She is the co-author of a research paper titled “Extreme heat and stock market activity“, that was published in “Ecological Economics”, a CNRS-ranked (Category 1) top international scientific journal.

A look at the “hot weather” effect on financial markets

In this article, Imane El Ouadghiri aims to advance the understanding of extreme temperatures’ effects “by examining the extent to which high temperatures affect stock market activity”.

She compares the French market’s trading volumes on days when Paris’ weather is scorching hot over 1995-2019.
The research’s empirical analyses show that, on average, trading volumes fall between 4 per cent and 10 per cent when maximum daily temperatures exceed 30°C (86°F).

“Alternative analyses such as bin tests, event studies, and time-series regressions” controlling for seasonal effects and financial market conditions confirm this negative association.

On a theoretical level, this study contributes to the literature on behavioural finance: it assesses the “hot weather” effect on financial markets. It also offers a view on the managerial and public policy implications of the heat waves affecting the financial decisions.

Ecological economics, a top international journal in a new field

“Ecological economics” is a CNRS-ranked journal (rank 1), whose purpose is to extend and integrate the understanding of the interfaces and interplay between ecosystems and the economy.

As a new field of inquiry, ecological economics looks at a number of “concrete problems or challenges related to governing economic activity in a way that promotes human well-being, sustainability, and justice”.

The journal provides a forum for critical work on ecological science, economics, and the analysis of values, behaviours, cultural practices, institutional structures, and societal dynamics.

The papers published in “Ecological Economics” focus on transdisciplinary methods, drawing on the insights offered by various intellectual traditions, and appealing to a diverse readership.