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Good Day Sunshine: Stock Returns and the Weather

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Author Info

  • David Hirshleifer

    (Fisher College of Business, Ohio State University, Department of Finance)

  • TYLER G. SHUMWAY

    (University of Michigan)

Abstract

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982- 97. Sunshine is strongly positively correlated with daily stock returns. After controlling for sunshine, other weather conditions such as rain and snow are unrelated to returns. If transactions costs are assumed to be minor, it is possible to trade profitably on the weather. These results are difficult to reconcile with fully rational price-setting.

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File URL: http://129.3.20.41/eps/fin/papers/0412/0412004.pdf
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Paper provided by EconWPA in its series Finance with number 0412004.

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Length: 40 pages
Date of creation: 04 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0412004

Note: Type of Document - pdf; pages: 40. PDF
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Keywords: market efficiency; mood and securities prices; psychology and finance;

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References

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  6. repec:cdl:econwp:234 is not listed on IDEAS
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  10. Saunders, Edward M, Jr, 1993. "Stock Prices and Wall Street Weather," American Economic Review, American Economic Association, vol. 83(5), pages 1337-45, December.
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  12. Raghavendra Rau, P. & Vermaelen, Theo, 1998. "Glamour, value and the post-acquisition performance of acquiring firms1," Journal of Financial Economics, Elsevier, vol. 49(2), pages 223-253, August.
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