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Does mood affect trading behavior?

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  • Kaustia, Markku
  • Rantapuska, Elias

Abstract

The assumption that mood affects investors’ behavior in the field is gaining acceptance due to experimental studies and papers linking stock returns with environmental variables, such as weather and length of day. To identify mood effects this paper utilizes account level stock trading data from all investors in Finland, a country with significant variation in weather and length of day. While some weather-related mood variables and calendar effects are individually significant, little of the day-to-day variation in trading is collectively explained by all such factors. In contrast, we find strong seasonal lower frequency patterns that seem connected to vacations.

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  • Kaustia, Markku & Rantapuska, Elias, 2016. "Does mood affect trading behavior?," Journal of Financial Markets, Elsevier, vol. 29(C), pages 1-26.
    • Handle: RePEc:eee:finmar:v:29:y:2016:i:c:p:1-26
    DOI: 10.1016/j.finmar.2015.08.001
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    More about this item

    Keywords

    Mood; Trading behavior; Weather; Seasonal affective disorder (SAD); Stock market;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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