Does the Weather Affect Stock Market Volatility?

18 Pages Posted: 13 Oct 2008 Last revised: 26 Jan 2011

See all articles by Lazaros Symeonidis

Lazaros Symeonidis

Essex Business School, University of Essex

George Daskalakis

MBS College of Business and Entrepreneurship

Raphael N. Markellos

University of East Anglia (UEA) - Norwich Business School

Date Written: June 1, 2010

Abstract

This paper investigates the empirical association between stock market volatility and investor mood-proxies related to the weather (cloudiness, temperature and precipitation) and the environment (nighttime length). Overall, our results suggest that cloudiness and length of nighttime are inversely related to historical, implied and realized measures of volatility. The strength of association seems to vary with the location of an exchange on Earth with respect to the equator. Weather deviations from seasonal norms and dummies representing extreme weather conditions do not offer additional explanatory power in our datasets.

Keywords: Stock market anomalies, Volatility, Sunshine effect, SAD effect, Behavioral Finance

JEL Classification: G14, G32

Suggested Citation

Symeonidis, Lazaros and Daskalakis, George and Markellos, Raphael N., Does the Weather Affect Stock Market Volatility? (June 1, 2010). Finance Research Letters, Vol. 7, No. 4, pp. 214-223, 2010, Available at SSRN: https://ssrn.com/abstract=1283169

Lazaros Symeonidis

Essex Business School, University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

George Daskalakis

MBS College of Business and Entrepreneurship ( email )

Saudi Arabia

Raphael N. Markellos (Contact Author)

University of East Anglia (UEA) - Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

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