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
Single market
Innovation
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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