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Weather Effects on Stock Returns and Volatility in South Asian Markets

Muhammad Fayyaz Sheikh (), Syed Zulfiqar Ali Shah () and Shahid Mahmood ()
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Muhammad Fayyaz Sheikh: G.C. University
Syed Zulfiqar Ali Shah: University of Warwick
Shahid Mahmood: University of Sargodha

Asia-Pacific Financial Markets, 2017, vol. 24, issue 2, 75-107

Abstract: Abstract We study the effect of mood-proxy variables on index returns and volatility in six South Asian markets. Our mood-proxy variables include six weather (temperature, humidity, cloud cover, air pressure, visibility, and wind speed), three weather indicator variables (fog, thunder storm and rain or drizzle) and two biorhythmic variables (SAD and lunar phases). We adopt a robust approach and attempt to select the best parsimonious econometric model for each market. Our findings suggest that mood-proxy variables have some convincing influences in South Asian capital markets. In some instances, these variables are influencing returns while in other instances they are influencing volatility.

Keywords: Anomaly; GARCH models; Investor sentiments; SAD; Stock returns; Temperature (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G14 G02 (search for similar items in EconPapers)
Date: 2017
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