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Analysis of the Impact of Weather on Trading in Equity Markets

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  • David Havlíček
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    This paper analyzes the impact of weather on the investment in the Czech and U.S. stock markets. It relies on the concept of behavioral finance, which analyzes the impact of psychology on investor decision-making. The influence of atmospheric phenomena is mainly studied as impact of occurrence of snow, rain or fog on the market returns. The research results show the impact of these phenomena only in a minority of cases. The research also analyzes the impact of the autumn season (SAD effect) on the psychology of investors and therefore market returns. This sequence wasn’t rebutted only at the Czech stock market. The incidence of observed atmospheric effects also failed to explain the January and Monday effects.

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    Article provided by University of Economics, Prague in its journal Český finanční a účetní časopis.

    Volume (Year): 2010 (2010)
    Issue (Month): 3 ()
    Pages: 49-62

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    Handle: RePEc:prg:jnlcfu:v:2010:y:2010:i:3:id:75:p:49-62
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    1. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, 06.
    2. Saunders, Edward M, Jr, 1993. "Stock Prices and Wall Street Weather," American Economic Review, American Economic Association, vol. 83(5), pages 1337-1345, December.
    3. Mehra, Rajnish & Sah, Raaj, 2002. "Mood fluctuations, projection bias, and volatility of equity prices," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 869-887, May.
    4. Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003. "Winter Blues: A SAD Stock Market Cycle," American Economic Review, American Economic Association, vol. 93(1), pages 324-343, March.
    5. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    7. Dowling, Michael & Lucey, Brian M., 2005. "Weather, biorhythms, beliefs and stock returns--Some preliminary Irish evidence," International Review of Financial Analysis, Elsevier, vol. 14(3), pages 337-355.
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