Effect of wind on stock market returns: evidence from European markets

Abstract

Environmental psychology studies have found evidence that wind speed has a strong influence on mood and comfort. This study investigated the relationship between wind speed and daily stock market returns across 18 European countries from 1994 to 2004. A significant and pervasive wind effect was found on stock returns. This finding was supported by psychological literature claiming that mood affects judgement and decision-making in situations involving uncertainty and risk, and coincides with the argument of misattribution. This investigation also found strong seasonality effect and temperature effect in European stock markets. Specifically, the influence of wind on stock returns is demonstrated to be more significant than that of sunlight, indicating that wind might exert a stronger impact on mood than sunshine and hence be a better proxy for mood than sunshine. Above all, our findings contradict the rational asset-pricing hypothesis and contribute to the behavioural finance literature.

Investor mood and financial markets

“…Thus, this result provides theoretical support for the argument of empirical studies that improved investor mood increases asset prices (e.g. Saunders, 1993;Hirshleifer and Shumway, 2003;Krivelyova and Robotti, 2003;Kamstra et al, 2003;Yuan et al, 2006;Shu and Hung, 2009).…”

“…Consequently, high geomagnetic activity is followed by negative stock returns while stock returns increase during periods of quiet geomagnetic activity. Similarly, temperature (Cao and Wei, 2005;Chang et al, 2006;and Keef and Roush, 2007) and wind (Keef and Roush, 2007;Shu and Hung, 2009) reportedly have a negative influence on stock prices.…”

“…Saunders, 1993;Hirshleifer and Shumway, 2003;Krivelyova and Robotti, 2003;Cao and Wei, 2005;Chang et al, 2006;Keef and Roush, 2007;and Shu and Hung, 2009), biorhythms (e.g. Kamstra et al, 2000;Kamstra et al, 2003;and Yuan et al, 2006), and beliefs .…”

Does Weather Contribute to Stock Price Variation? A Cointegration Analysis

“…Plenty of empirical support can be found for the argument that weather impacts on the equity returns. Number of investigations has been carried out considering different weather factors such as number of sunshine hours (Shu and Hung, 2009), cloud cover, humidity levels (Shim et al, 2015), wind speed (Shu and Hung, 2009;Shim et al, 2015), raininess (Hirshleifer and Shumway, 2003) and temperature (Cao and Wei, 2005;Floros, 2008Floros, , 2011Shim et al, 2015) Cao and Wei (2005) examined the temperature anomaly in nine stock indices in eight equity markets in USA, Canada, Britain, Germany, Sweden, Australia, Japan and Taiwan using bintest and regression. The study revealed that there is a negative relationship between temperature and stock market returns.…”

Twitter investment alerts for Ibex35 securities

“…Psychological research has documented the effects of mood on decision-making process (Etzioni, 1988) and a good mood is associated with fast and efficient decision-making (Forgas, 1998). Saunders (1993), Hirshleifer and Shumway (2003), Krivelyova and Robotti (2003), Cao and Wei (2005), Chang, Nieh, Yang, & Yang (2006), Keef and Roush (2007), Shu and Hung (2009), and Gómez and Prado (2014) have shown empirical researches in behavioral finance that has accumulated different evidences. Said evidence shows how returns are related to mood variables.…”