The impact of weather on German retail investors

Abstract

We explore the impact of weather on trading by individual investors. Over a time span of 94 months, we analyze daily trading records of individual investors. Controlling for various investor-and market-specific factors, we find a two-fold effect of weather. We first observe that investor sentiment, as measured by purchases relative to sales, is significantly higher on days with good weather. In addition, we find that retail investors generally trade more on bad weather days. This result is consistent with the notion that retail investors incur an opportunity cost for spending time trading on days with good weather.