Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 7-Day Trial for You or Your Team.

Learn More →

Rain or Shine: Where is the Weather Effect?

Rain or Shine: Where is the Weather Effect? There is considerable empirical evidence that emotion influences decision‐making. In this paper, we use a database of individual investor accounts to examine the weather effects on traders. Our analysis of the trading activity in five major US cities over a six‐year period finds virtually no difference in individuals’ propensity to buy or sell equities on cloudy days as opposed to sunny days. If the association between cloud cover and stock returns documented for New York and other world cities is indeed caused by investor mood swings, our findings suggest that researchers should focus on the attitudes of market‐makers, news providers or other agents physically located in the city hosting the exchange. NYSE spreads widen on cloudy days. When we control for this, the weather effect becomes smaller and insignificant. We interpret this as evidence that the behaviour of market‐makers, rather than individual investors, may be responsible for the relation between returns and weather. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Financial Management Wiley

Rain or Shine: Where is the Weather Effect?

Download PDF
20 pages

Loading next page...
 
/lp/wiley/rain-or-shine-where-is-the-weather-effect-lPL2N04W8X

References (41)

Publisher
Wiley
Copyright
Copyright © 2005 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1354-7798
eISSN
1468-036X
DOI
10.1111/j.1354-7798.2005.00298.x
Publisher site
See Article on Publisher Site

Abstract

There is considerable empirical evidence that emotion influences decision‐making. In this paper, we use a database of individual investor accounts to examine the weather effects on traders. Our analysis of the trading activity in five major US cities over a six‐year period finds virtually no difference in individuals’ propensity to buy or sell equities on cloudy days as opposed to sunny days. If the association between cloud cover and stock returns documented for New York and other world cities is indeed caused by investor mood swings, our findings suggest that researchers should focus on the attitudes of market‐makers, news providers or other agents physically located in the city hosting the exchange. NYSE spreads widen on cloudy days. When we control for this, the weather effect becomes smaller and insignificant. We interpret this as evidence that the behaviour of market‐makers, rather than individual investors, may be responsible for the relation between returns and weather.

Journal

European Financial Management – Wiley

Published: Nov 1, 2005

There are no references for this article.