Mood and UK equity pricing

Abstract

We investigate the relationship between mood and UK equity pricing. Seven variables that are argued to proxy for mood are tested, including four weather variables (temperature, precipitation, wind speed and geomagnetic storms), and three biorhythm variables (Seasonal Affective Disorder, Daylight Savings Time Changes and lunar phases). Using GARCH specifications of the equity indices, and multiple constructs of each of the mood-proxy variables, we find evidence of a relationship between UK equity pricing and high temperatures and wind speed. However, the results are generally unfavourable towards a conclusion that investor mood influences aggregate UK equity pricing.

On the existence of sports sentiment: the relation between football match results and stock index returns in Europe

“…Since many phenomena and anomalies have been found and many articles have been written on this topic, we do not attempt to present a complete survey of this literature here. 1 Nevertheless, there have been some studies in which the authors were not able to confirm such a relation (e.g., Marquering et al 2006 or Dowling andLucey 2008).…”

Seasonal affective disorder and the Romanian stock market

“…The same direction of correlation is highlighted for the Irish market in Dowling and Lucey (2005), but only between the Winter Solstice and the Spring Equinox. In a further study, Dowling and Lucey (2008a) have tested other weather and biorhythm variables 5 , and the SAD effect on the UK stock market and have found opposing results for the UK Small Index and the UK Main Index. For the UK Small Index, the results are consistent with the depression arising from the reduction of daylight hours, but the results are reversed for the UK Main Index.…”

“…A new emerged category includes the so called mood anomalies determined by the weather parameters: number of hours of sunshine, temperature, humidity, geomagnetic storms (Cao & Wei, 2005;Dowling & Lucey, 2008a, 2008bSaunders, 1993) and by biorhythm variables: full moon effect (Dichev & Janes, 2003), daylight saving time (DST) effect (Kamstra, Kramer, & Levi, 2000, seasonal affective disorder (SAD) effect (Dowling & Lucey, 2005;Kamstra, Kramer, & Levi, 2003).…”

Emotions in the Financial Markets

“…Dowling and Lucey (2005a, 2005b, 2005c analyze the relationship among weather, moods, and equity prices globally and also specifically in Ireland and the United Kingdom. Other researchers find a correlation between occurrences unrelated to the financial markets, such as phases of the moon, sporting events, films, and market behavior, where the mediating variable may be mood or emotion.…”