Red Sky at Night or in the Morning, to the Equity Market Neither a Delight Nor a Warning: The Weather Effect Re-Examined Using Intraday Stock Data
The European Journal of Finance, 23(14), pp. 1280-1310, DOI: 10.1080/1351847X.2016.1151808
Posted: 18 Mar 2016 Last revised: 9 Oct 2017
Date Written: March 11, 2016
Unlike most of the existing literature on the weather effect, we conducted our analysis by employing intraday weather and market data, examining a large set of stocks rather than indices only, including volume and volatility data in the study and inspecting a wide number of weather variables (temperature, humidity, pressure, visibility, wind, cloud, rain and snow). Our analysis covered the Italian stock market for the period August 2005–March 2014 for a total of 2201 trading days. We conclude that no systematic relationship seems to exist between the weather and the Italian stock market. Moreover, our results raise doubts that testing the weather effect by limiting the analysis to indices only can lead to spurious conclusions.
Keywords: weather effect, behavioural finance, Italian stock market, market anomalies, efficient market hypothesis, trading behaviour, sunshine effect
JEL Classification: G02, G11
Suggested Citation: Suggested Citation