Does the Weather Affect Stock Market Volatility?
18 Pages Posted: 13 Oct 2008 Last revised: 26 Jan 2011
Date Written: June 1, 2010
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: Suggested Citation