Stock Market Returns: A Temperature Anomaly
- Topics:
- Financial Research
- Tags:
- Finance,
- Investment,
- Stock,
- Stock Market,
- Temperature
- Source:
- finance-research.net
FREE Registration is required
Overview: This study investigates if stock market returns are related to the temperature. Psychological research has shown that temperature is one of the meteorological variables that significantly affect people’s mood. Mood changes in turn lead to behavioral changes. It is known that lower temperatures can lead to aggression, while higher tempratures can lead to aggression as well as apathy. Aggression could result in more risk-taking while apathy could impede risktaking. We therefore expect lower temperatures to be related to higher stock returns and higher temperatures to be related to higher or lower stock returns, depending on the trade-off between the two competing effects. We examine the potential linkage between temperatures and stock market returns for eight international stock exchanges. Our analysis reveals that lower temperatures are indeed related to higher stock returns, and higher temperatures are related to lower stock returns. The relationship is significant both statistically and economically when the temperature is low, and is robust to various altervative tests.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 454KB | Date: Aug 2002 | Pages: 40
