Are Weather Induced Moods Priced in Global Equity Markets?

Abstract

Recent research in behavioural finance has tested for evidence of mood misattribution influencing investor decision-making. The approach adopted is to test for a relationship between widely experienced mood proxy variables and equity returns. Variables ranging from weather, to Seasonal Affective Disorder (SAD), to sporting events, amongst other variables, have all been used in the process of these investigations. This paper conducts a comprehensive, econometrically robust, analysis of the influence of mood proxy variables across a global range of 37 equity market indices and 22 small cap indices. Our study combines key mood proxy variables tested in a range of previous papers in one study. We specifically test for SAD, Daylight Savings Time Changes, lunar, and geomagnetic effects. Only SAD appears to have any effect, worldwide.