The Influence of Weather Factors to Mood and Human Behavior on the Stock Market Indices Performance by the Tendency towards Geographical Location

Abstract

This research tries to determine the weather factors affect mood and human behavior. Some previous researches find that weather can influence human behavior and mood, like concentration, optimism, self-confidence, aggression, and performance. Many weather indicators can affect human behavior and mood, but only few of them have been investigated. In this paper, we use temperature, precipitation, hours of sunshine, and humidity. Mood and behavior make people make decisions based on such indicators, including the trading decision in the stock market. Therefore, mood and behavior turn the investors to become more irrational. In this research, geographical locations are also being included because the difference in location can make a difference in the climate. By using indices return from 44 countries, we get that higher temperature creates more aggression and makes investors more aggressive and risk-taking, leading to the higher returns, hours of sunshine also make investors more optimistic and less risk-averse which leads to higher returns. Higher humidity also leads to a higher concentration. We also find that in Europe and Asia, the effect of weather variables is much stronger than in other continents. Additional results show that stock markets in Europe and Asia are easily affected by weather factors, and the high elevation also has a more significant effect.