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Paper Stats:
Abstract Views: 3959
Downloads: 505
Download Rank: 7938
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Playing the Field: Geomagnetic Storms and the Stock Market
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CESARE ROBOTTI
Federal Reserve Bank of Atlanta
ANYA KRIVELYOVA
Boston College - Department of Economics
October 2003
Federal Reserve Bank of Atlanta Working Paper No. 2003-5b
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Abstract:
Explaining movements in daily stock prices is one of the most difficult tasks in modern finance. This paper contributes to the existing literature by documenting the impact of geomagnetic storms on daily stock market returns. A large body of psychological research has shown that geomagnetic storms have a profound effect on people's moods, and, in turn, people's moods have been found to be related to human behavior, judgments and decisions about risk. An important finding of this literature is that people often attribute their feelings and emotions to the wrong source, leading to incorrect judgments. Specifically, people affected by geomagnetic storms may be more inclined to sell stocks on stormy days because they incorrectly attribute their bad mood to negative economic prospects rather than bad environmental conditions. Misattribution of mood and pessimistic choices can translate into a relatively higher demand for riskless assets, causing the price of risky assets to fall or to rise less quickly than otherwise. The authors find strong empirical support in favor of a geomagnetic-storm effect in stock returns after controlling for market seasonals and other environmental and behavioral factors. Unusually high levels of geomagnetic activity have a negative, statistically and economically significant effect on the following week's stock returns for all U.S. stock market indices. Finally, this paper provides evidence of substantially higher returns around the world during periods of quiet geomagnetic activity.
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Note: Previously titled "Playing the Field: Geomagnetic Storms and International Stock Markets"
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Keywords: Stock returns, geomagnetic storms, seasonal affective disorders, misattribution of mood, behavioral finance
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JEL Classifications: G1
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Working Paper Series
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Suggested Citation
Robotti, Cesare and Krivelyova, Anya, "Playing the Field: Geomagnetic Storms and the Stock Market"
(October 2003).
Federal Reserve Bank of Atlanta Working Paper No. 2003-5b. Available at SSRN: http://ssrn.com/abstract=375702
or DOI: 10.2139/ssrn.375702
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Contact Information for
CESARE
ROBOTTI
(Contact Author)
Email address for CESARE
ROBOTTI
Federal Reserve Bank of Atlanta
1000 Peachtree Street NE
Atlanta
, GA
30309-4470
United States
404-498-8543 (Phone)
404-498-8810 (Fax)
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Contact Information for
ANYA
KRIVELYOVA
Email address for ANYA
KRIVELYOVA
Boston College - Department of Economics
140 Commonwealth Avenue
Chestnut Hill
, MA
02467
United States
404-869-4715 (Phone)
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