Stock market performance: is the weather a bother in the tropics? Evidence from Ghana

Abstract

PurposeIn the wake of climate change and its associated impact on firms' performance, this paper attempts to provide a piece of empirical evidence in support of the effect of weather conditions on the stock market performance.Design/methodology/approachMonthly time-series dataset and the fully modified ordinary least square (FMOLS) semi-parametric econometric technique are used to establish the effect of weather variables on stock market return.FindingsThis study finds that temperature and wind speed have a negative and statistically significant relationship with stock market performance. Likewise, humidity exhibits a negative relationship with stock market performance, albeit insignificant. The relevant stock market and macroeconomic control variables are statistically significant in addition to exhibiting their expected signs. The findings lend support to advocates of behavioural factors inclusion in asset pricing and decision-making.Practical implicationsFor policy purposes, the authors recommend that traders, investors and stock exchange managers must take into consideration different weather conditions as they influence investors' behaviour, investment decisions, and consequently, the stock market performance.Originality/valueTo the best of the authors’ knowledge, this study provides the first empirical evidence of the nexus between disaggregated weather measures and stock market performance in Ghana. This study uses monthly data (which are very rare in the literature, especially for developing country studies) to provide empirical evidence that weather influences stock market performance.

Stock market response to COVID-19 pandemic: A comparative evidence from two emerging markets

“…The dependent variable is chosen because in empirical literature (see [ 23 , 38 , 50 ]) stock market performance has been measured using the stock market index. Similarly, in this study we used stock market index as a measure of stock market performance as our dependent variable.…”

“…Al-Awadhi et al . [4] and Li [36] have noted that returns on the stock market respond to major events such as disasters (Kowalewski & Spiewanowski, 2020), news [37] and weather [50] and political events [30] .…”

Investor Attention and Equity as a Hedge against Inflation in Ghana

“…Kpanie et al (2014) also identified a significant long-run relationship between the Ghana Stock Exchange's performance and oil prices and money supply in Ghana. Tetteh & Amoah (2020) found that temperature, wind speed, and humidity has adverse effect on stock market performance in Ghana. Market players must therefore be very considerate of the various seasonal changes in the weather as they have a significant impact on investor behaviors and the performance of the Journal of Financial Risk Management stock markets.…”