Retail investors' activity and climate disasters
Abstract
We analyze the effects of climate diasters on retail investors' trading activity. Results show that retail investors trade significantly less during and around climate disasters, and retail buyers exhibit higher returns than sellers. Climate disasters weaken the positive return predictability of the past months' order imbalances while strengthening it for the past six months's order imbalances. In the short run, firms within climate disaster countries with retail net buying underperform those with negative imblances. Instead, in the long run, firms within and outside climate disaster countries with positive order flows outperform thise with negative order flows. Finally, the estimates on the return and order imbalance comovement around climate disasters are consistent with the main findings.