Does Mood Affect Trading Behavior?

57 Pages Posted: 30 Jun 2011 Last revised: 13 Oct 2015

Date Written: August 5, 2015

Abstract

The assumption that mood affects investors’ behavior in the field is gaining acceptance due to experimental studies and papers linking stock returns with environmental variables, such as weather and length of day. To identify mood effects this paper utilizes account level stock trading data from all investors in Finland, a country with significant variation in weather and length of day. While some weather-related mood variables and calendar effects are individually significant, little of the day-to-day variation in trading is collectively explained by all such factors. In contrast, we find strong seasonal lower frequency patterns that seem connected to vacations.

Keywords: mood, trading behavior, weather, seasonal affective disorder (SAD), stock market

JEL Classification: D03, G11, G12

Suggested Citation

Kaustia, Markku and Rantapuska, Elias Henrikki, Does Mood Affect Trading Behavior? (August 5, 2015). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1875645 or http://dx.doi.org/10.2139/ssrn.1875645

Markku Kaustia

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Elias Henrikki Rantapuska (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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