Winter Blues: A Sad Stock Market Cycle

37 Pages Posted: 7 Mar 2000

See all articles by Mark J. Kamstra

Mark J. Kamstra

York University - Schulich School of Business; Rady School of Management

Lisa A. Kramer

University of Toronto - Rotman School of Management

Maurice D. Levi

University of British Columbia (UBC) - Sauder School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003


This paper investigates the role of seasonal affective disorder (SAD) in the seasonal time-variation of stock market returns. SAD is an extensively documented medical condition whereby the shortness of the days in fall and winter leads to depression for many people. Experimental research in psychology and economics indicates that depression, in turn, causes heightened risk aversion. Building on these links between the length of day, depression, and risk aversion, we provide international evidence that stock market returns vary seasonally with the length of the day, a result we call the SAD effect. Using data from numerous stock exchanges and controlling for well-known market seasonals as well as other environmental factors, stock returns are shown to be significantly related to the amount of daylight through the fall and winter. Patterns at different latitudes and in both hemispheres provide compelling evidence of a link between seasonal depression and seasonal variation in stock returns: Higher latitude markets show more pronounced SAD effects and results in the Southern Hemisphere are six months out of phase, as are the seasons. Overall, the economic magnitude of the SAD effect is large.

Note: Previously titled, "Winter Blues: Seasonal Affective Disorder (SAD) and Stock Market Returns."

Keywords: Stock returns, seasonality, behavioral finance, seasonal affective disorder, SAD, depression

JEL Classification: G1

Suggested Citation

Kamstra, Mark J. and Kramer, Lisa A. and Levi, Maurice David, Winter Blues: A Sad Stock Market Cycle (October 2003). Federal Reserve Bank of Atlanta Working Paper No. 2002-13a, Available at SSRN: or

Mark J. Kamstra (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Lisa A. Kramer

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
416-978-2496 (Phone)
416-971-3048 (Fax)


Maurice David Levi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Henry Angus 865
Vancouver BC V6T 1Z2
604-822-8260 (Phone)
604-822-8521 (Fax)

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