Good Day Sunshine: Stock Returns and the Weather

  • Hirshleifer D
  • Shumway T
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Abstract

morning sunshine in the city of a country's leading stock exchange and daily market index returns across 26 countries from 1982 to 1997. Sunshine is Psychological evidence and casual intuition predict that sunny weather is as- sociated with upbeat mood. This paper examines the relationship between strongly significantly correlated with stock returns. After controlling for sun- shine, rain and snow are unrelated to returns. Substantial use of weather- based strategies was optimal for a trader with very low transactions costs. However, because these strategies involve frequent trades, fairly modest costs eliminate the gains. These findings are difficult to reconcile with fully rational price setting. SUNSHINE AFFECT

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