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Good Day Sunshine: Stock Returns and the Weather

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Author Info
David Hirshleifer (Fisher College of Business, Ohio State University)
Tyler Shumway (University of Michigan Business School)

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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 weather-based 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. Copyright 2003 by the American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 58 (2003)
Issue (Month): 3 (06)
Pages: 1009-1032
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Handle: RePEc:bla:jfinan:v:58:y:2003:i:3:p:1009-1032

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. George Loewenstein, Ted O'Donoghue and Matthew Rabin., 2000. "Projection Bias in Predicting Future Utility," Economics Working Papers E00-284, University of California at Berkeley. [Downloadable!]
    Other versions:
  2. Michael S. Rashes, 2001. "Massively Confused Investors Making Conspicuously Ignorant Choices (MCI-MCIC)," Journal of Finance, American Finance Association, vol. 56(5), pages 1911-1927, October. [Downloadable!] (restricted)
  3. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May. [Downloadable!] (restricted)
  4. Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2000. "Losing Sleep at the Market: The Daylight Saving Anomaly," American Economic Review, American Economic Association, vol. 90(4), pages 1005-1011, September. [Downloadable!] (restricted)
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  5. Saunders, Edward M, Jr, 1993. "Stock Prices and Wall Street Weather," American Economic Review, American Economic Association, vol. 83(5), pages 1337-45, December. [Downloadable!] (restricted)
  6. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March. [Downloadable!] (restricted)
  7. Avery, Christopher & Chevalier, Judith, 1999. "Identifying Investor Sentiment from Price Paths: The Case of Football Betting," Journal of Business, University of Chicago Press, vol. 72(4), pages 493-521, October. [Downloadable!] (restricted)
  8. Raghavendra Rau, P. & Vermaelen, Theo, 1998. "Glamour, value and the post-acquisition performance of acquiring firms1," Journal of Financial Economics, Elsevier, vol. 49(2), pages 223-253, August. [Downloadable!] (restricted)
  9. Wright, William F. & Bower, Gordon H., 1992. "Mood effects on subjective probability assessment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 52(2), pages 276-291, July. [Downloadable!] (restricted)
  10. Ho, Thomas S. Y. & Michaely, Roni, 1988. "Information Quality and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 53-70, March. [Downloadable!]
  11. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation, Yale University. [Downloadable!]
  12. Mark Britten-Jones, 1999. "The Sampling Error in Estimates of Mean-Variance Efficient Portfolio Weights," Journal of Finance, American Finance Association, vol. 54(2), pages 655-671, 04. [Downloadable!] (restricted)
  13. Shiller, Robert J, 1990. "Speculative Prices and Popular Models," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 55-65, Spring. [Downloadable!] (restricted)
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