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Weather effects on returns: Evidence from the Korean stock market

Author

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  • Yoon, Seong-Min
  • Kang, Sang Hoon

Abstract

In this study, we attempted to determine whether a relationship exists between stock returns and the weather variables of temperature, humidity, and cloud cover in the Korean stock market. We delineated three key implications with regard to weather effects. First, after the 1997 financial crisis, the presence of a weather effect disappeared. Second, the inclusion of weather variables helps to model the GJR-GARCH process in the conditional variance. Third, the interaction effects of weather variables fully demonstrate the weather effect, but the interaction effects also vanished after the crisis. Overall, the findings of this study indicate that the weather effect was weakened as the result of heightened market efficiency.

Suggested Citation

  • Yoon, Seong-Min & Kang, Sang Hoon, 2009. "Weather effects on returns: Evidence from the Korean stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(5), pages 682-690.
  • Handle: RePEc:eee:phsmap:v:388:y:2009:i:5:p:682-690
    DOI: 10.1016/j.physa.2008.11.017
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    References listed on IDEAS

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    Citations

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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. repec:eee:finana:v:52:y:2017:i:c:p:94-103 is not listed on IDEAS
    3. Kang, Sang Hoon & Jiang, Zhuhua & Lee, Yeonjeong & Yoon, Seong-Min, 2010. "Weather effects on the returns and volatility of the Shanghai stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(1), pages 91-99.
    4. Nicholas Apergis & Panagiotis Artikis, 2012. "Weather Conditions and the Bank Lending Channel: A GMM Approach from US Banking," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(2), pages 17-34, April.
    5. repec:eee:phsmap:v:483:y:2017:i:c:p:182-192 is not listed on IDEAS
    6. repec:kap:apfinm:v:24:y:2017:i:2:d:10.1007_s10690-017-9225-2 is not listed on IDEAS
    7. Frühwirth, Manfred & Sögner, Leopold, 2015. "Weather and SAD related mood effects on the financial market," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 11-31.
    8. Kim, Jae H., 2017. "Stock returns and investors' mood: Good day sunshine or spurious correlation?," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 94-103.
    9. Lu, Jing & Chou, Robin K., 2012. "Does the weather have impacts on returns and trading activities in order-driven stock markets? Evidence from China," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 79-93.

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