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Does the weather affect stock market volatility?

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  • Daskalakis, George
  • Symeonidis, Lazaros
  • Markellos, Raphael

Abstract

This paper investigates the empirical association between stock market volatility and investor mood-proxies related to the weather (cloudiness, temperature and precipitation) and the environment (nighttime length). Overall, our results suggest that cloudiness and length of nighttime are inversely related to historical, implied and realized measures of volatility. The strength of association seems to vary with the location of an exchange on Earth with respect to the equator. Weather deviations from seasonal norms and dummies representing extreme weather conditions do not offer additional explanatory power in our datasets.

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File URL: http://mpra.ub.uni-muenchen.de/34128/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34128.

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Date of creation: 10 Sep 2009
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Handle: RePEc:pra:mprapa:34128

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Related research

Keywords: Stock market anomalies; Volatility; Sunshine effect; SAD effect; Behavioral Finance;

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  1. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
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Cited by:
  1. Mamatzakis, E, 2013. "Does weather affect US bank loan efficiency?," MPRA Paper 51616, University Library of Munich, Germany.
  2. Hasan, Syed Akif & Subhani, Muhammad Imtiaz, 2011. "Which Matters the Most for the Trading Index? (Law and Order or Weather Conditions)," MPRA Paper 34736, University Library of Munich, Germany, revised 2011.
  3. Christos Floros, 2011. "On the relationship between weather and stock market returns," Studies in Economics and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 28(1), pages 5-13, March.
  4. Aboura, Sofiane & Chevallier, Julien, 2013. "Leverage vs. feedback: Which Effect drives the oil market?," Finance Research Letters, Elsevier, Elsevier, vol. 10(3), pages 131-141.
  5. Shan, Liwei & Gong, Stephen X., 2012. "Investor sentiment and stock returns: Wenchuan Earthquake," Finance Research Letters, Elsevier, Elsevier, vol. 9(1), pages 36-47.

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