Stock Market Returns and the Weather

Snow covers a street sign at the corner of Wall St. and Broad St. in New York's financial districtAn interesting paper by Ming Dong, Andréanne Tremblay of York University, Toronto investigated the effects of five weather conditions (sunshine, wind, rain, snow depth, and temperature) on daily index returns of 49 countries from 1973 to 2012.

The effects of the weather on mood depend critically on geographical regions, and more precisely, on regions defined by their annual average temperature. The emotional effects of other weather variables may be also specific to the temperature region – in hot countries rain might seen as a positive whilst in cold climates rain could be seen to exacerbate the cold climate. However they make two assumptions:

1. Comfortable weather should lead to an upbeat investor mood and therefore high stock returns.
2. The weather effects on returns should be stronger when people spend more time outdoors or when outdoor time is more valuable.

Here are some of their findings:

Cold Countries

In the cold region, the positive sunshine effect on returns concentrates in the summer, when investors spend more time outdoors, and in late winter and early spring, when the marginal utility of outdoor experience may be particularly high after a long winter. However very cold weather is also associated with higher returns which suggest that cold stimulates risk-taking, referring to psychological studies in which participants reported increased aggression as temperatures dropped below -8 degrees C.

Hot Countries

Sunshine has a positive effect on returns during the warmer portion of the year, from May through September—but not June or July, presumably because the scorching sun compromises the outdoor time during peak heat. The sunshine effect is also strong from December to February, consistent with the idea that sunshine brings pleasant warmth during the winter when people still spend considerable time outdoors.

Mild Countries

Stock returns and temperature are strongly negatively correlated in the winter (from December to February). This finding is incompatible with the comfortable weather hypothesis, because it is unlikely that during winter times in the cold region, lower temperature leads to happy mood.


1. The effects of the weather on stock returns depend critically on the temperature environment, which is characterised by geographical region and month of the year.

2. All five weather conditions significantly influence returns, especially during seasons when people expect to spend, or highly value, time in the outdoors.

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