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Good Day Sunshine: Stock Returns and the Weather

Author

Listed:
  • David Hirshleifer

    (Fisher College of Business, Ohio State University, Department of Finance)

  • TYLER G. SHUMWAY

    (University of Michigan)

Abstract

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982- 97. Sunshine is strongly positively correlated with daily stock returns. After controlling for sunshine, other weather conditions such as rain and snow are unrelated to returns. If transactions costs are assumed to be minor, it is possible to trade profitably on the weather. These results are difficult to reconcile with fully rational price-setting.

Suggested Citation

  • David Hirshleifer & TYLER G. SHUMWAY, 2004. "Good Day Sunshine: Stock Returns and the Weather," Finance 0412004, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0412004
    Note: Type of Document - pdf; pages: 40. PDF
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    market efficiency; mood and securities prices; psychology and finance;

    JEL classification:

    • G - Financial Economics

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