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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://128.118.178.162/eps/fin/papers/0412/0412004.pdf
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Bibliographic Info

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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Web page: http://128.118.178.162

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Keywords: market efficiency; mood and securities prices; psychology and finance;

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  12. Avery, Christopher & Chevalier, Judith, 1999. "Identifying Investor Sentiment from Price Paths: The Case of Football Betting," The Journal of Business, University of Chicago Press, vol. 72(4), pages 493-521, October.
  13. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
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