VI. Conclusions
Numerous studies in psychology have established that people’s moods and judgments are
affected by exposure to sunlight. Research in finance has exploited this finding to test whether
exogenous determinants of individuals’ moods can affect stock prices. Saunders (1993) finds
that cloudiness in New York City is associated with lower returns on U.S. stocks. Hirshleifer
and Shumway (2003) use cloud cover in cities with stock exchanges around the world to predict
returns on the exchanges. They also find evidence that stock returns are lower on cloudy days.
A limitation of both of these studies is that the weather at the stock exchange is often not
the same as the weather experienced by investors who are submitting orders to the exchanges.
Orders arrive at the New York Stock Exchange from all over the U.S. and all over the world.
9 A criticism of the results in Panel A is that the month of January, which has historically had high average stock
returns, might also be more likely to have overcast skies. This criticism does not apply to Panel B, where we
compare same-day returns of stocks from clear and cloudy cities.
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New York City weather is therefore a poor proxy for the cloud cover and mood of investors
submitting orders. Similarly, cloud cover in cities with stock exchanges is unlikely to be the
same as the cloudiness facing investors submitting orders to those exchanges. In some cases,
like Brussels or Copenhagen, the weather in the stock exchange city is likely to reflect the
weather facing all investors in the country. In other cases, like Rio de Janeiro or Sydney, the
cloud cover in the stock exchange city is unlikely to reflect the cloud cover over the entire
country. In all cases, orders arrive at the exchanges from the U.S. and elsewhere.
To get an alternative measure of the weather investors are experiencing, we use the
findings of Coval and Moskowitz (1999, 2001), Grinblatt and Keloharju (2001), Huberman
(2001), and Zhu (2002) that investors invest disproportionately in local companies. We
assemble portfolios of 4,949 Nasdaq stocks based in 25 U.S. cities and demonstrate that trading
has a strong local component. Our evidence that trading in our sample stocks is concentrated
among investors living near the company headquarters includes different intraday patterns for
stocks from different time zones, diminished volume for stocks from cities that are experiencing
blizzards, and lower volume on Yom Kippur for stocks from cities with large Jewish
populations.
The strong local component in trading of Nasdaq provides a compelling case for using
weather near a company’s headquarters to test for effects of cloudiness on returns. There are
several advantages to these tests. First, using weather near a company’s headquarters allows
many more observations of weather conditions and stock returns than if we had restricted our
attention to weather in New York. Second, while a justification for using New York weather is
that many institutions trade from there, it seems implausible to us that the trading of these
sophisticated investors is particularly likely to be affected by cloudiness. Our focus on
cloudiness near company headquarters allows us to see if moods of the less sophisticated
individual investors who trade a stock affect returns. Finally, and most important, by using
stocks that trade in the same market but face different weather conditions, we can look for
influences of weather on stock returns after eliminating the noise from the economic factors that
affect returns market-wide.
Despite these advantages, we are unable to find any evidence of a relation between cloud
cover near a company headquarters and its stock’s return. Like Hirshleifer and Shumway (2003)
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and Saunders (1993), however, we do find weak evidence that returns of our stocks are lower on
days it is cloudy in New York City. Is this because of trading by institutions that are based in
New York? We find this hard to believe. We are examining equal-weighted portfolios of
Nasdaq stocks, and many of these securities are too small to attract institutional interest. It is
also doubtful that professional investors are more prone to biases in judgment brought on by
cloudiness than the small investors located near a company. It is also possible, as Goetzmann
and Zhu (2003) suggest, that specialist’s moods are affected by weather, leading to wider spreads
and larger returns. We would, however, not dismiss the possibility that the relationship between
cloud cover in New York and stock returns is spurious.
An unambiguous result of our analysis is that U.S. weather effects are too slight to
provide opportunities for profitable trading of Nasdaq stocks. The average coefficient on New
York City cloudiness in Table 7 is -0.038. This means that a $100 Nasdaq stock can be expected
to rise in price by 3.8 cents more on totally sunny days than on days that are completely overcast.
The effects of local cloudiness are even smaller. Trading costs would swamp any profits to be
found in implementing a weather-based trading strategy.
)
Ah, de staat zal er wel aardig op verdient hebben met hun 60% belang. Ben eens benieuwd of zij er snel vanaf gaan willen. ;x