Rainmakers: Bad Weather and Institutional Investor Performance

Abstract

This study investigates the impact of weather conditions on the performance of institutional investors. I test two competing hypotheses. The negative mood hypothesis posits that bad weather induces a negative mood among asset managers and results in worse portfolio performance. The productivity increase hypothesis posits that bad weather increases the productivity of asset managers by reducing cognitive distractions from outdoor leisure activities, leading to better investment performance. I find strong supporting evidence for the productivity increase hypothesis that bad (rainy) weather leads to better portfolio returns. This result remains robust to various performance measures and across institutional investors headquartered in different regions. I also find that bad weather is associated with an increase in investors’ accessing activity of corporate filings, especially insider trading filings, further corroborating the productivity increase hypothesis.

Keywords: bad weather, precipitation, institutional investors, portfolio return, productivity

JEL Classification: G11, G23, G41, Q54