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

Purpose - In 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/approach - Monthly 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. Findings - This 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 implications - For 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/value - To 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.