Good Day Sunshine: Stock Returns and the Weather

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 significantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. There were positive net-of-transaction costs profits to be made from substantial use of weather-based strategies, but the magnitude of the gains was fairly modest. These findings are difficult to reconcile with fully rational price-setting. I need to laugh, and when the sun is out, I've got something I can laugh about. I feel good in a special way; I'm in love and it's a sunny day. Good Day Sunshine, Good Day Sunshine, Good Day Sunshine We take a walk, the sun is shining down, Burns my feet as they touch the ground.

The Power of Sunspots: An Experimental Analysis

“…Group 5 shows a weaker convergence process, since the β 2k coefficient is slightly higher (see also coefficient compared to the previous cases. 23 Overall, there is an interesting pattern in all four treatments, given by the correlation between coefficients β 1k and β 2k (Spearman's ρ = 0.66, p < 0.01). 24 Indeed, looking at the behavior in the first 10 periods unmasks a potential reason for the different convergence processes.…”

“…Running the regression with all periods yields similar results. 23 Looking at this group in detail, we see that four subjects chose 50 most of the time and one of them eventually adopted a sunspot-driven strategy (25/75). The remaining two subjects conditioned their choices on the private signal during the whole experiment.…”

Does Weather Actually Affect Tipping? An Empirical Analysis of Time‐Series Data1

“…For this reason, it seems plausible to assume that weather-vis-à-vis mood-affects behavior, including economic behavior. Indeed, weather has been shown to be correlated with suicide, crime, and equity returns (Digon & Bock, 1966;Rotton & Frey, 1985;Cohn, 1990;Hirshleifer & Shumway, 2003). But does a mood-mediated relationship between weather and behavior also hold true for restaurant tipping behavior?…”

An Analysis of Private Investors' Stock Market Return Forecasts

“…This finding corresponds to the welldocumented observation that returns over the weekend are lower than those during weekdays (the weekend effect, French, 1980). Finally, inspired by recent empirical evidence (Cao and Wei, 2002, Hirshleifer and Shumway, 2003, Saunders, 1993 we analyze whether the implied returns are affected by the prevailing weather conditions but do not find evidence of a consistent relation.…”

“…Saunders (1993) documents that less cloud cover is associated with higher returns 5 and Cao and Wei (2002) find that temperature is related to stock returns. Similarly, Hirshleifer and Shumway (2003) document a relation between morning sunshine and stock returns. They also provide a discussion of the psychological literature linking weather conditions, mood, and decision making.…”