Abstract

http://ssrn.com/abstract=2323852
 
 

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Weather-Induced Mood, Institutional Investors, and Stock Returns


William N. Goetzmann


Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Dasol Kim


Case Western Reserve University - Department of Banking & Finance

Alok Kumar


University of Miami - School of Business Administration

Qin (Emma) Wang


University of Michigan Dearborn - College of Business

September 26, 2013


Abstract:     
This study shows that weather-based indicators of mood impact perceptions of mispricing and trading decisions of institutional investors. We use survey and disaggregated trade data to show that relatively cloudier days increase perceived overpricing in both individual stocks and the Dow Jones Industrial Index, and increase the selling propensities of institutions. We introduce stock-level measures of investor mood, and demonstrate that investor pessimism negatively impacts daily stock returns, mostly among stocks that are costly to arbitrage. We also document return comovement among stocks experiencing similar changes in weather-induced mood. These findings complement existing studies on the weather effect on stock index returns, and identify an additional channel through which it can manifest.

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Date posted: September 13, 2013 ; Last revised: September 26, 2013

Suggested Citation

Goetzmann, William N. and Kim, Dasol and Kumar, Alok and Wang, Qin (Emma), Weather-Induced Mood, Institutional Investors, and Stock Returns (September 26, 2013). Available at SSRN: http://ssrn.com/abstract=2323852 or http://dx.doi.org/10.2139/ssrn.2323852

Contact Information

William N. Goetzmann
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Dasol Kim
Case Western Reserve University - Department of Banking & Finance ( email )
10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
Alok Kumar (Contact Author)
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
Qin (Emma) Wang
University of Michigan Dearborn - College of Business ( email )
Dearborn, MI 48126
United States
313-583-6487 (Phone)
HOME PAGE: http://sites.google.com/site/qinwangresearch/
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