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

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 nd 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.

Number of Pages in PDF File: 61

Keywords: happiness, risk-taking, climate

JEL Classification: D01, D91, G11

working papers series