Good Day Sunshine:
Stock Returns and the Weather

David Hirshleifer and Tyler Shumway
August, 2001


Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country's leading stock exchange and market index stock returns that day at 26 stock exchanges internationally from 1982-97. Sunshine is strongly significantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. There were positive net-of-transaction costs profits from substantial use of weather-based strategies, but the magnitude of the gains was fairly modest. These findings are difficult to reconcile with fully rational price-setting.

A full-text version of this paper in Adobe Acrobat (.pdf) format is available for downloading here.

Data used in the paper are available here. The first column in the dataset is the observation date (in YYMMDD format). The second column is the actual average cloudiness for a particular location on a particular date. The next column is our demeaned measure of cloudiness, which is the variable we actually use for our regressions. The fourth column has the daily return, and the last column has an abbreviation of the city's name.

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