Rain or Shine: Where is the Weather Effect?

William Goetzmann and Ning Zhu

No 9465, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Saunders (1993) and Hirshleifer and Shumway (2001) document the effect of weather on stock returns. The proposed explanation in both papers is that investor mood affects cognitive processes and trading decisions. In this paper, we use a database of individual investor accounts to examine the weather effects on traders. Our analysis of the trading activity in five major U.S. cities over a six-year period finds vistually no difference in individuals propensity to buy or sell equities on cloudy days as opposed to sunny days. If the association between cloud cover and stock returns documented for New York and other world cities is indeed caused by investor mood swings, our findings suggest that researchers should focus on the attitudes of market-makers, news providers or other agents physically located in the city hosting the exchange. NYSE spreads widen on cloudy days. When we control for this, the significance of the weather effect is dramatically reduced. We interpret this as evidence that the behavior of market-makers, rather than individual investors, may be responsible for the relation between returns and weather.

JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2003-02
New Economics Papers: this item is included in nep-cfn
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Goetzmann, William N. and Ning Zhu. "Rain or Shine: Where is the Weather Effect?" European Financial Management 11, 5 (November 2005): 559-578.

Downloads: (external link)
http://www.nber.org/papers/w9465.pdf (application/pdf)

Related works:
Journal Article: Rain or Shine: Where is the Weather Effect? (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:9465

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9465

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().