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Effect of Weather on Sectoral Stock Indices Returns and Volatilities: Evidence from the Moroccan Stock Market

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  • Fouzia Alloul
  • El Mehdi Ferrouhi

Abstract

This study examines the influence of eight key weather factors, including atmospheric pressure (ATPRS), clear sky (CLSKY), precipitation (PRECP), relative and specific humidity (RHUMD and SHUMD, respectively), as well as temperature (TEMPR), wind direction and speed (WNDR and WNSP, respectively), on the returns and volatilities of the seven Moroccan sectors most sensitive to the weather (Agri-food/Production, Beverages, Distributors, Electricity, Leisure and Hotels, Oil and Gas, and Transport) from January 4, 1993, to October 30, 2022. The objective was to analyze how weather affects the fluctuations of sectoral stock indices and assess sectoral vulnerability. Utilizing daily frequency weather and stock market data and implementing a GJR-GARCH (1,1) model combined with an autoregressive (AR) process, the results demonstrate that all sectors are influenced by weather, particularly the Agri-food/Production and Beverages sectors. These insights are vital for the stakeholders in Morocco. Investors can make informed decisions, policymakers can create targeted support policies, and businesses can develop risk management strategies to handle weather-related challenges, ensuring economic stability and competitiveness. JEL Classification G10, G41

Suggested Citation

  • Fouzia Alloul & El Mehdi Ferrouhi, 2025. "Effect of Weather on Sectoral Stock Indices Returns and Volatilities: Evidence from the Moroccan Stock Market," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 17(3), pages 431-452, September.
    • Handle: RePEc:sae:emeeco:v:17:y:2025:i:3:p:431-452
    DOI: 10.1177/09749101251320514
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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