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Causality Of Weather Conditions In Australian Stock Equity Returns

Author

Listed:
  • Svetlana Vlady

    (Griffith University Department of Accounting, Finance and Economics, Gold Coast campus Queensland, Australia)

  • Ekrem Tufan, PhD

    (Canakkale Onsekiz Mart University School of Tourism and Hotel Management Canakkale,Turkey)

Abstract

This study investigates causality of weather and its impact on Australian stock market returns. The Australian S&P/ASX Index 200, which includes exclusively Australian domicile companies as well as some weather-sensitive companies, has been selected as a proxy for the Australian capital market. This chapter contributes empirical findings on the impact of weather conditions on stock returns and discusses it from the Efficient Market Hypothesis (EMH) and Behavioral Finance (BF) perspectives. The ARCH and CARCH models along with the Granger Causality test are applied to gain precise and accurate results. On one hand, the capital market could respond to new weather-related information (news) and could incorporate this information in the stock valuation process. Alternatively, stock prices could be affected by the mental and/or physical changes in investors caused by weather conditions.

Suggested Citation

  • Svetlana Vlady & Ekrem Tufan, PhD, 2011. "Causality Of Weather Conditions In Australian Stock Equity Returns," Revista Tinerilor Economisti (The Young Economists Journal), University of Craiova, Faculty of Economics and Business Administration, vol. 1(17), pages 184-197, November.
  • Handle: RePEc:aio:rteyej:v:1:y:2011:i:17:p:184-197
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    File URL: http://feaa.ucv.ro/RTE/017-24.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Weather Effect; Granger Causality Test; Australian Stock Exchange; ARCH and GARCH Tests;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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