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The impact of weather on order submissions and trading performance

Author

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  • Chuang, Yi-Wei
  • Tsai, Wei-Che
  • Weng, Pei-Shih

Abstract

Using an account-level dataset consisting of the complete order submissions of various types of traders on the Taiwan Futures Exchange, we perform intraday analyses to investigate whether the weather influences investors' order submission behaviors and subsequent trading performance. The results of our empirical study show that the weather conditions exclusively affect the order aggressiveness of domestic individual traders, not of institutional investors or individual day traders. We also find that the weather negatively affects the trading performance of individual traders. The average daily returns of the most weather-sensitive individual traders are approximately 0.06% (22% per year) lower than those of the least weather-sensitive individual traders. Our study is the first to verify the impact of weather on trader order submission decisions; in addition, our findings provide an alternative explanation for the generally inferior trading performance of individual traders—they are just too weather-sensitive when submitting orders.

Suggested Citation

  • Chuang, Yi-Wei & Tsai, Wei-Che & Weng, Pei-Shih, 2020. "The impact of weather on order submissions and trading performance," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x20306685
    DOI: 10.1016/j.pacfin.2020.101456
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    More about this item

    Keywords

    Order submission; Weather; Order aggressiveness; Individual trader;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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