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Weather Effects on Stock Returns and Volatility in South Asian Markets

Author

Listed:
  • Muhammad Fayyaz Sheikh

    (G.C. University)

  • Syed Zulfiqar Ali Shah

    (University of Warwick)

  • Shahid Mahmood

    (University of Sargodha)

Abstract

We study the effect of mood-proxy variables on index returns and volatility in six South Asian markets. Our mood-proxy variables include six weather (temperature, humidity, cloud cover, air pressure, visibility, and wind speed), three weather indicator variables (fog, thunder storm and rain or drizzle) and two biorhythmic variables (SAD and lunar phases). We adopt a robust approach and attempt to select the best parsimonious econometric model for each market. Our findings suggest that mood-proxy variables have some convincing influences in South Asian capital markets. In some instances, these variables are influencing returns while in other instances they are influencing volatility.

Suggested Citation

  • Muhammad Fayyaz Sheikh & Syed Zulfiqar Ali Shah & Shahid Mahmood, 2017. "Weather Effects on Stock Returns and Volatility in South Asian Markets," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 24(2), pages 75-107, June.
    • Handle: RePEc:kap:apfinm:v:24:y:2017:i:2:d:10.1007_s10690-017-9225-2
    DOI: 10.1007/s10690-017-9225-2
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    References listed on IDEAS

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    Cited by:

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    3. Waldemar Tarczyński & Sebastian Majewski & Małgorzata Tarczyńska-Łuniewska & Agnieszka Majewska & Grzegorz Mentel, 2021. "The Impact of Weather Factors on Quotations of Energy Sector Companies on Warsaw Stock Exchange," Energies, MDPI, vol. 14(6), pages 1-14, March.

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    More about this item

    Keywords

    Anomaly; GARCH models; Investor sentiments; SAD; Stock returns; Temperature;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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