The Impact of Weather on German Retail Investors

Review of Finance (Forthcoming)

Posted: 5 May 2014

See all articles by Jochen Schmittmann

Jochen Schmittmann

International Monetary Fund (IMF)

Jenny Pirschel

ZEW – Leibniz Centre for European Economic Research

Steffen Meyer

University of Southern Denmark - Department of Business and Economics; Danish Finance Institute

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Date Written: March 14, 2014

Abstract

We explore the impact of weather on trading by individual investors. Over a time span of 94 months, we analyze daily trading records of individual investors. Controlling for various investor- and market-specific factors, we find a twofold effect of weather. We first observe that investor sentiment, as measured by purchases relative to sales, is significantly higher on days with good weather. In addition, we find that retail investors generally trade more on bad weather days. This result is consistent with the notion that retail investors incur an opportunity cost for spending time trading on days with good weather.

Keywords: weather; individual investor; mood; trading behavior; stock market

JEL Classification: D03, G11, G12

Suggested Citation

Schmittmann, Jochen and Pirschel, Jenny and Meyer, Steffen and Hackethal, Andreas, The Impact of Weather on German Retail Investors (March 14, 2014). Review of Finance (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2432591

Jochen Schmittmann

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jenny Pirschel

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Steffen Meyer (Contact Author)

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Danish Finance Institute ( email )

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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