Effect of Ap-Index of Geomagnetic Activity on S&amp;P 500 Stock Market Return

Peng, Lifang; Li, Ning; Pan, Jingwen

doi:10.1155/2019/2748062

Cited by 1 publication

(7 citation statements)

References 23 publications

(32 reference statements)

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“…Behavioral research in finance documents that circumstances that influence investors' moods affect their decision-making ability in the capital market. Supporting this notion, Krivelyova and Robotti (2003) and Peng et al . (2019) show that geomagnetic storms have a negative impact on stock returns.…”

Section: Discussionmentioning

confidence: 84%

“…Krivelyova and Robotti (2003) investigate the association between stock market returns and the magnitude of GMA and find lower returns when the GMA is high. Peng et al . (2019) also find a decline in stock returns as the GMA increases.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Notably, Kay (1994) examines the effect of GMA on the human mind and finds that the activity increases depression among humans by im-balancing and disrupting the circadian rhythm (sleep-wake cycle) and melatonin production (a natural hormone that regulates sleep). A couple of studies examine the consequence of GMA in the capital market context and find that these storms lower stock returns (Krivelyova and Robotti, 2003; Peng et al ., 2019). We extend this collaborative geomagnetic-capital market literature and investigate whether GMA influences the market's reaction to earnings information.…”

Section: Introductionmentioning

confidence: 99%

“…Existing evidence associates GMA with heart diseases, neurological system diseases, behavioral diseases and total demises among humans (Palmer et al ., 2006; Mendoza and de la Peña, 2010; Breus et al ., 2016; Kay, 1994). Such physiological and psychological diseases could cause risk aversion and distraction among individuals (Krivelyova and Robotti, 2003; Peng et al ., 2019). Existing capital market studies show that investors react less to earnings news when a circumstance cause distraction or reduces their efficiency (deHaan et al ., 2017; Lin, 2015).…”

Section: Introductionmentioning

confidence: 99%

“…The literature on the effect of GMA on the capital market is minimal and focuses primarily on stock returns. We add to the GMA literature by documenting that GMA lowers investors' pricing of earnings news and affects the timing of the firm's earnings news release (Krivelyova and Robotti, 2003; Peng et al ., 2019). We also extend the behavioral research in finance that focuses on circumstances like weather, temperature and sporting outcome (Cao and Wei, 2005; Keef and Roush, 2007; Kamstra et al , 2000; Edmans et al ., 2007; Dichev and Janes, 2003).…”

Section: Introductionmentioning

confidence: 99%

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Effect of geomagnetic activity on investors and managers: evidence from the pricing and timing of disclosure of earnings news

Asthana

Kalelkar

2023

ARA

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PurposeThis paper's purpose was to examine the impact of geomagnetic activity (GMA) on the timing and valuation of earnings information disclosed by firms every quarter.Design/methodology/approachThe authors start the analyses with a sample of 112,669 client firms from 1989 to 2018. To analyze the impact of GMA on the earnings response coefficient (ERC), the authors use the three-day cumulative abnormal returns and cumulative abnormal returns for the extended post-earnings announcement window [2, 75] as the dependent variables. The authors interact unexpected earnings (UE) with the C9 Index, an index commonly used to measure GMA and study how GMA affects the pricing of new public information. To examine the effect of GMA on the timing of disclosure of earnings news, the authors regress a variant of the GMA index on the propensity to disclose bad earnings news.FindingsThe authors find significantly lower earnings response coefficients during periods of high GMA. This effect is permanent and stock prices do not correctly incorporate the implications of earnings information over time. The authors also show that managerial behavior is affected by GMA as well and the managers are more (less) likely to release bad (good) news during periods of higher activity. Finally, the authors also find that in situations where stakeholders are likely to rely on modern technology that depends minimally on humans, the adverse impact of GMA on the pricing of earnings information is mitigated.Originality/valueThe literature on the effect of GMA on the capital market is very limited and focuses primarily on stock returns, while the behavioral finance literature focuses on circumstances like weather, temperature and sporting outcome to study how the investors' mood affects their capital market behavior. The authors add to both the literature by investigating how GMA influences investors' and managers' behaviors in the capital market.

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Section: Discussionmentioning

confidence: 84%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%