Recent experimental studies illustrate the influence of price path, particularly the ‘non-straight’ price path, on several aspects of investor decision-making. The paper employs an empirical proxy for price path based on convexity and demonstrates that price convexity significantly impacts the selling decisions with transaction-level data. We find that a price path that is likely to signal a favourable (unfavourable) price movement in the future lowers (heightens) the selling propensity of traders in stocks. The findings suggest that likely expectations about future price movement, as could be inferred from the experienced price path, significantly influence the trading decisions of retail traders.

We provide novel evidence on the role of firms’ banking relationships with government banks (GOBs) during a climate-related shock when relief funds are unavailable. Using variation in the locations of rainfall shocks and firms’ banking relationships, we find that firms maintaining exclusive banking relationships with GOBs (GOB firms) secure more debt relative to other firms during rainfall shocks. We do not find such effects for firms that maintain exclusive relationships with private banks, foreign banks, or maintain multiple banking relationships. We also find that GOB relationships are particularly beneficial for firms that are more vulnerable to rainfall shocks, have long-term relationships with GOBs, and are, at the same time, healthier compared to other firms. With regard to real effects, GOB firms invest more and remain profitable than other firms during rainfall shocks. Overall, our results highlight the benefits of GOB relationships for firms during climate shocks.