Weather and SAD related mood effects on the financial market

Manfred Frühwirth, Leopold Soegner

    Research output: Contribution to journalArticle

    Abstract

    We investigate the relationship between weather or seasonal affective disorder and the financial market, using a wide variety of financial market data as well as several weather variables and a seasonal affective disorder proxy. We distinguish between a model with a direct effect of the weather and seasonal affective disorder on the financial market and one with an indirect effect via a latent variable mood. Whereas only the latter model is justified by psychological literature, the former model is often used as an approximation. One major innovation of this paper is a consistent econometric implementation of the indirect effects model. We demonstrate that the approximation by direct effects yields inconsistent estimates. Our study supports some weather related, but no seasonal affective disorder related effects on the financial market. We show that, instead of focusing on single market segments, an analysis of various financial market segments is required. We also show that the analysis of individual stock returns or bond spreads reveals additional information, compared to the analysis of aggregate stock or bond indexes.

    Original languageEnglish (US)
    Pages (from-to)11-31
    Number of pages21
    JournalQuarterly Review of Economics and Finance
    Volume57
    DOIs
    StatePublished - Aug 1 2015

    Fingerprint

    Mood
    Financial markets
    Weather
    Seasonal affective disorder
    Market segments
    Approximation
    Direct effect
    Indirect effects
    Innovation
    Single market
    Bond spreads
    Psychological
    Stock returns
    Econometrics
    Latent variables
    Market data

    Keywords

    • Mood effects
    • Seasonal affective disorder
    • Weather effects

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Cite this

    Weather and SAD related mood effects on the financial market. / Frühwirth, Manfred; Soegner, Leopold.

    In: Quarterly Review of Economics and Finance, Vol. 57, 01.08.2015, p. 11-31.

    Research output: Contribution to journalArticle

    Frühwirth, Manfred ; Soegner, Leopold. / Weather and SAD related mood effects on the financial market. In: Quarterly Review of Economics and Finance. 2015 ; Vol. 57. pp. 11-31.
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