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Abstract
This paper investigates the practical value of seasonal climate forecasts by examining their impact on financial markets. The authors find that options traders price the uncertainty generated by upcoming US National Oceanic and Atmospheric Administration (NOAA) Winter and El Niño Outlooks. Improved forecast skill reduces firms' exposure to climate shocks and increases hedging activity. The study concludes that financial markets value skillful seasonal forecasts and that this value should inform government resource allocation.
Publisher
Nature Communications
Published On
May 14, 2024
Authors
Derek Lemoine, Sarah Kapnick
Tags
seasonal climate forecasts
financial markets
climate shocks
hedging activity
NOAA
El Niño Outlooks
options traders

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