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Does the weather affect stock market volatility?

  • Daskalakis, George
  • Symeonidis, Lazaros
  • Markellos, Raphael

This paper investigates the empirical association between stock market volatility and investor mood-proxies related to the weather (cloudiness, temperature and precipitation) and the environment (nighttime length). Overall, our results suggest that cloudiness and length of nighttime are inversely related to historical, implied and realized measures of volatility. The strength of association seems to vary with the location of an exchange on Earth with respect to the equator. Weather deviations from seasonal norms and dummies representing extreme weather conditions do not offer additional explanatory power in our datasets.

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File URL: http://mpra.ub.uni-muenchen.de/34128/1/MPRA_paper_34128.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34128.

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Date of creation: 10 Sep 2009
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Handle: RePEc:pra:mprapa:34128
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  1. Saunders, Edward M, Jr, 1993. "Stock Prices and Wall Street Weather," American Economic Review, American Economic Association, vol. 83(5), pages 1337-45, December.
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  5. Mark Kamstra & Lisa Kramer & Maurice Levi, 2002. "Winter blues: a SAD stock market cycle," Working Paper 2002-13, Federal Reserve Bank of Atlanta.
  6. repec:cup:cbooks:9780521710091 is not listed on IDEAS
  7. Dowling, Michael & Lucey, Brian M., 2008. "Robust global mood influences in equity pricing," Journal of Multinational Financial Management, Elsevier, vol. 18(2), pages 145-164, April.
  8. Simon Gervais & Terrance Odean, . "Learning To Be Overconfident," Rodney L. White Center for Financial Research Working Papers 05-97, Wharton School Rodney L. White Center for Financial Research.
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  18. Levy, Ori & Galili, Itai, 2008. "Stock purchase and the weather: Individual differences," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 755-767, September.
  19. Malcolm Baker & Jeremy C. Stein, 2002. "Market Liquidity as a Sentiment Indicator," NBER Working Papers 8816, National Bureau of Economic Research, Inc.
  20. Shirley J. Huang & Qianqiu Liu & Jun Yu, 2007. "Realized Daily Variance of S&P 500 Cash Index: A Revaluation of Stylized Facts," Annals of Economics and Finance, Society for AEF, vol. 8(1), pages 33-56, May.
  21. 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.
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  23. Meir Statman & Steven Thorley & Keith Vorkink, 2006. "Investor Overconfidence and Trading Volume," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1531-1565.
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