Weather-Induced Mood, Institutional Investors, and Stock Returns

56 Pages Posted: 13 Sep 2013 Last revised: 25 Oct 2014

William N. Goetzmann

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

Dasol Kim

Office of Financial Research, US Department of the Treasury

Alok Kumar

University of Miami - School of Business Administration

Qin (Emma) Wang

Oklahoma State University - Tulsa

Date Written: September 8, 2014

Abstract

This study shows that weather-based indicators of mood impact perceptions of mispricing and trading decisions of institutional investors. Using survey and disaggregated trade data, we show that relatively cloudier days increase perceived overpricing in individual stocks and the Dow Jones Industrial Index, and increase selling propensities of institutions. We introduce stock-level measures of investor mood; investor pessimism negatively impacts stock returns, mostly amongst stocks with higher arbitrage costs, and stocks experiencing similar changes in weather-induced mood exhibit return comovement. These findings complement existing studies on how weather impacts stock index returns, and identify another channel through which it can manifest.

JEL Classification: D84, G11, G12, G14, G23

Suggested Citation

Goetzmann, William N. and Kim, Dasol and Kumar, Alok and Wang, Qin (Emma), Weather-Induced Mood, Institutional Investors, and Stock Returns (September 8, 2014). Available at SSRN: https://ssrn.com/abstract=2323852 or http://dx.doi.org/10.2139/ssrn.2323852

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dasol Kim (Contact Author)

Office of Financial Research, US Department of the Treasury ( email )

717 14th Street, NW
Washington, DC 20220
United States

Alok Kumar

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

Oklahoma State University - Tulsa ( email )

700 North Greenwood
NH 320
Tulsa, OK 74106
United States
918-594-8394 (Phone)
918-594-8281 (Fax)

HOME PAGE: http://spears.okstate.edu/profiles/?id=626

Paper statistics

Downloads
689
Rank
28,873
Abstract Views
3,346