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Good Day Sunshine: Stock Returns and the Weather

Dice Center Working Paper No. 2001-3

31 Pages Posted: 17 Apr 2001  

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Tyler Shumway

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 28, 2001

Abstract

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982-97. Sunshine is strongly positively correlated with daily stock returns. After controlling for sunshine, other weather conditions such as rain and snow are unrelated to returns. If transactions costs are assumed to be minor, it is possible to trade profitably on the weather. These results are difficult to reconcile with fully rational price-setting.

JEL Classification: G12, G14, D84, F39

Suggested Citation

Hirshleifer, David A. and Shumway, Tyler, Good Day Sunshine: Stock Returns and the Weather (March 28, 2001). Dice Center Working Paper No. 2001-3. Available at SSRN: https://ssrn.com/abstract=265674 or http://dx.doi.org/10.2139/ssrn.265674

David Hirshleifer (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tyler Shumway

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4129 (Phone)
734-936-0274 (Fax)

HOME PAGE: http://www.umich.edu/~shumway

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