Good Day Sunshine: Stock Returns and the Weather

Posted: 22 Jul 2003

See all articles by David A. Hirshleifer

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

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Abstract

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relationship between morning sunshine in the city of a country's leading stock exchange and daily market index returns across 26 countries from 1982 to 1997. Sunshine is strongly significantly correlated with stock returns. After controlling for sunshine, rain and snow are unrelated to returns. Substantial use of weather-based strategies was optimal for a trader with very low transactions costs. However, because these strategies involve frequent trades, fairly modest costs eliminate the gains. These findings are difficult to reconcile with fully rational price setting.

Suggested Citation

Hirshleifer, David A. and Shumway, Tyler, Good Day Sunshine: Stock Returns and the Weather. Journal of Finance, Vol. 58, pp. 1009-1032, June 2003. Available at SSRN: https://ssrn.com/abstract=411135

David A. 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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