Keywords

sunshine effect, investor mood, stock returns

Abstract

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relationship between morning sunshine in the city of a country's leading stock exchange and daily market index returns across 26 countries from 1982 to 1997. Sunshine is strongly significantly correlated with stock returns. After controlling for sunshine, rain and snow are unrelated to returns. Substantial use of weatherbased strategies was optimal for a trader with very low transactions costs. However, because these strategies involve frequent trades, fairly modest costs eliminate the gains. These findings are difficult to reconcile with fully rational price setting.

Original Publication Citation

Good Day Sunshine: Stock Returns and the Weather, 2003, with David Hirshleifer, Journal of Finance

Document Type

Peer-Reviewed Article

Publication Date

2001

Publisher

Journal of Finance

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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