Does Weather Matter?
AbstractWe use semi-parametric bin tests, regression analyses and copula modeling techniques to identify the relationship between temperature and stock market returns. After examining 25 international stock markets, we find that the negative correlation is statistically significant in individual countries, i.e. the higher is the temperature, the lower the stock returns. However, we fail to find joint significance of temperature effects across markets after correcting for market comovement by seemingly unrelated regression. We also find negative temperature effects on returns are robust to different measures of daily temperature. Both constant-dependence and time-varying-dependence conditional copula models are employed to analyze the general dependence between temperature and stock market returns. The copula results show that the negative relation remains after controlling for autocorrelations, GARCH effects and non-normality and the dependence between temperature and stock market returns is relatively stable over time.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0809.
Date of creation: Nov 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
Stock market returns; Temperature; Copula.;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Hirshleifer & Tyler Shumway, 2003.
"Good Day Sunshine: Stock Returns and the Weather,"
Journal of Finance,
American Finance Association, vol. 58(3), pages 1009-1032, 06.
- Jacobsen, B. & Marquering, W.A., 2004. "Is it the weather?," Research Paper ERS-2004-100-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Cao, Melanie & Wei, Jason, 2005. "Stock market returns: A note on temperature anomaly," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1559-1573, June.
- Saunders, Edward M, Jr, 1993. "Stock Prices and Wall Street Weather," American Economic Review, American Economic Association, vol. 83(5), pages 1337-45, December.
- G. William Schwert, 1990.
"Why Does Stock Market Volatility Change Over Time?,"
NBER Working Papers
2798, National Bureau of Economic Research, Inc.
- Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December.
- Andrew Patton, 2004.
"Modelling Asymmetric Exchange Rate Dependence,"
wp04-04, Warwick Business School, Financial Econometrics Research Centre.
- Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003.
"Winter Blues: A SAD Stock Market Cycle,"
American Economic Review,
American Economic Association, vol. 93(1), pages 324-343, March.
- Kamstra, M.J. & Kramer, L.A. & Levi, M.D., 1998.
"Losing Sleep at the Market: The Daylight-Savings Anomaly,"
dp98-04, Department of Economics, Simon Fraser University.
- Lisa A. Kramer & Mark J. Kamstra & Maurice D. Levi, 2000. "Losing Sleep at the Market: The Daylight Saving Anomaly," American Economic Review, American Economic Association, vol. 90(4), pages 1005-1011, September.
- Jondeau, Eric & Rockinger, Michael, 2006. "The Copula-GARCH model of conditional dependencies: An international stock market application," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 827-853, August.
- Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bo Chen).
If references are entirely missing, you can add them using this form.