Weather effects on returns: Evidence from the Korean stock market

Weather Effects on Stock Returns and Volatility in South Asian Markets

“…However, they used raw temperature data only. Yoon and Kang (2009) argue that, before financial crisis 1997, extremely low temperatures positively influenced the returns, while extremely high humidity negatively affected the returns. Keef and Roush (2002) study the relationship of stock market returns with wind speed and direction.…”

“…These mood proxy variables include, among others, temperature (e.g., Cao & Wei, 2005;T. Chang, Nieh, Yang, & Yang, 2006;Kang, Jiang, Lee, & Yoon, 2010;Lu & Chou, 2012), daylight savings time changes (e.g., Dowling & Lucey, 2008;Kamstra, Kramer, & Levi, 2000), humidity, wind speed, visibility (e.g., Kang et al, 2010;Lu & Chou, 2012;Yoon & Kang, 2009) and the 'Seasonal Affective Disorder ', SAD, (e.g., Garrett, Kamstra, & Kramer, 2005;Kamstra et al, 2003). Kamstra et al (2003) contend that people become less tolerant to risk when days shorten -SAD effect.…”

Instrumental-Variable Estimation of Bangkok-Weather Effects in the Stock Exchange of Thailand

“…In this study, I follow the procedure of previous studies (e.g., Worthington, 2009) to relate the stock return linearly to M weather variables on day t as in Equation (1) Saunders, 1993;Yoon & Kang, 2009). ρ is the autocorrelation coefficient.…”

“…Finally, et is the regression error. The model in Equation (1) Previous studies, e.g., Yoon and Kang (2009), considered various weather variables but estimated the effect for each variable one at a time. I do not follow this approach because weather variables tend to be correlated (Worthington, 2009).…”

“…This assumption is inconsistent with the empirical findings in previous studies. For example, Yoon and Kang (2009) found significant temperature effects in the Korean stock market for the full sample period of 15 January 1990, to 13 December 2006. However, when the researchers divided the sample into two subsamples -from 15 January 1990, to 30 September 1997, and from 1 October 1997, to 13 December 2006 -they found significant effects in the first but not the second sub-period.…”