Do Weather-Induced Moods Affect the Processing of Earnings News?

48 Pages Posted: 14 Aug 2015 Last revised: 31 Jan 2017

See all articles by Ed deHaan

Ed deHaan

University of Washington - Michael G. Foster School of Business

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management

Joseph D. Piotroski

Stanford Graduate School of Business

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Date Written: November 28, 2016

Abstract

We investigate whether unpleasant environmental conditions affect stock market participants’ responses to information events. We draw from psychology research to develop a new prediction that weather-induced negative moods reduce market participants’ activity levels. Exploiting geographic variation in equity analysts’ locations, we find compelling evidence that analysts experiencing unpleasant weather are slower or less likely to respond to an earnings announcement relative to analysts responding to the same announcement but experiencing pleasant weather. Price association tests find evidence consistent with reduced activity due to weather-induced moods delaying equilibrium price adjustments following earnings announcements. We also use our analyst-based research design to re-examine an existing prediction that unpleasant weather induces investor pessimism, and find evidence of both analyst pessimism and reduced activity in the presence of unpleasant weather. Together, our study provides new evidence that both extends and reaffirms findings of a relation between unpleasant weather and market activities, and contributes to the broader psychology and economics literature on the impact of weather-induced mood on labor productivity.

Keywords: mood; attention; information processing; analysts; stock pricing; weather

JEL Classification: G14, M41

Suggested Citation

deHaan, Ed and Madsen, Joshua and Piotroski, Joseph D., Do Weather-Induced Moods Affect the Processing of Earnings News? (November 28, 2016). Journal of Accounting Research, Forthcoming, Stanford University Graduate School of Business Research Paper No. 15-47, Available at SSRN: https://ssrn.com/abstract=2643050 or http://dx.doi.org/10.2139/ssrn.2643050

Ed DeHaan (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Joseph D. Piotroski

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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