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Weather and Financial Risk-Taking: Is Happiness the Channel?

Author

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  • Cahit Guven

Abstract

Weather variables, and sunshine in particular, are found to be strongly correlated with financial variables. I consider self-reported happiness as a channel through which sunshine affects financial variables. I examine the influence of happiness on risk-taking behavior by instrumenting individual happiness with regional sunshine, and I find that happy people appear to be more risk-averse in financial decisions, and accordingly choose safer investments. Happy people take more time for making decisions and have more self-control. Happy people also expect to live longer and accordingly seem more concerned about the future than the present, and expect less inflation.

Suggested Citation

  • Cahit Guven, 2009. "Weather and Financial Risk-Taking: Is Happiness the Channel?," SOEPpapers on Multidisciplinary Panel Data Research 218, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp218
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.338505.de/diw_sp0218.pdf
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    Cited by:

    1. Zuzana Brokesova & Andrej Cupak & Anthony Lepinteur & Marian Rizov, 2021. "Wealth, Assets and Life Satisfaction: A Metadata Instrumental-Variable Approach," Working and Discussion Papers WP 4/2021, Research Department, National Bank of Slovakia.
    2. Vishal Chandr Jaunky & Jamiil Jeetoo & Shreya Rampersad, 2020. "Happiness and Consumption in Mauritius: An Exploratory Study of Socio-Economic Dimensions, Basic Needs, Luxuries and Personality Traits," Journal of Happiness Studies, Springer, vol. 21(7), pages 2377-2403, October.
    3. Claudia Schmiedeberg & Jette Schröder, 2014. "Does Weather Really Influence the Measurement of Life Satisfaction?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 117(2), pages 387-399, June.
    4. Yulei Rao & Lixing Mei & Rui Zhu, 2016. "Happiness and Stock-Market Participation: Empirical Evidence from China," Journal of Happiness Studies, Springer, vol. 17(1), pages 271-293, February.
    5. Pandey, Dharen Kumar & Kumari, Vineeta & Palma, Alessia & Goodell, John W., 2024. "Are markets in happier countries less affected by tragic events? Evidence from market reaction to the Israel–Hamas conflict," Finance Research Letters, Elsevier, vol. 60(C).
    6. Lepori, Gabriele M., 2015. "Positive mood and investment decisions: Evidence from comedy movie attendance in the U.S," Research in International Business and Finance, Elsevier, vol. 34(C), pages 142-163.
    7. Lenka Mynaříková & Vít Pošta, 2023. "The Effect of Consumer Confidence and Subjective Well-being on Consumers’ Spending Behavior," Journal of Happiness Studies, Springer, vol. 24(2), pages 429-453, February.
    8. Sylvia Kämpfer & Michael Mutz, 2013. "On the Sunny Side of Life: Sunshine Effects on Life Satisfaction," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(2), pages 579-595, January.
    9. Delis, Manthos D. & Mylonidis, Nikolaos, 2015. "Trust, happiness, and households’ financial decisions," Journal of Financial Stability, Elsevier, vol. 20(C), pages 82-92.
    10. Li, Yue & W. Goodell, John & Shen, Dehua, 2021. "Does happiness forecast implied volatility? Evidence from nonparametric wave-based Granger causality testing," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 113-122.

    More about this item

    Keywords

    happiness; risk-taking; climate;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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