Traders buy more on sunny days, according to a new study out by a group of finance professors.
The authors summed up their paper, “Weather-Induced Mood, Institutional Investors, and Stock Returns,” in the Harvard Law School’s corporate governance blog:
Using the survey data, we find that sunnier days are associated with optimistic responses related to stock mispricing. That is, investor optimism increases the likelihood of perceived underpricing in both individual stocks and the Dow Jones Industrial Average … We show that sunnier days are associated with increased buying propensities of institutional investors.
The paper notes that “prior research also supports the idea that mood can have an intertemporal effect on decision making.” Also, previous studies have found that cloud cover over the New York Stock Exchange has a correlation with negative stock market index returns.
So, if you can predict the weather, you may have an advantage in the market.
The full paper is available here.
(via Matt Levine)
Business Insider Emails & Alerts
Site highlights each day to your inbox.