Good Day Sunshine: Stock Returns and the Weather

Hirshleifer, David; Shumway, Tyler

doi:10.2139/ssrn.265674

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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

See all articles by David Hirshleifer

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER)

Tyler Shumway

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

There 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: Suggested Citation

Hirshleifer, David 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