Spanish Stock Returns: Rational or Weather-Influenced?

20 Pages Posted: 1 Oct 2002

See all articles by Ángel Pardo Tornero

Ángel Pardo Tornero

University of Valencia - Department of Financial Economics

Enric Valor

University of Valencia - Department of Financial Economics

Abstract

Psychological studies support the existence of an influence of weather on mood. It could affect the behaviour of market traders, as suggested by some authors, and this should be reflected by the stock returns. This paper investigates the possible relation between weather and market index returns in the context of the Spanish market, in order to test the above hypothesis. In 1989, this market changed its open outcry trading system into a computerised and decentralised trading system. Therefore, it is possible to check the influence of weather variables (sunshine hours and humidity levels) on index returns in an open outcry trading system, and to compare it with a screen traded environment. The empirical evidence indicates that, independently of the trading system, there is no influence of weather on stock prices. Thus, these findings do not contest the notion of efficient market.

Suggested Citation

Pardo Tornero, Ángel and Valor i Micó, Enric, Spanish Stock Returns: Rational or Weather-Influenced?. Available at SSRN: https://ssrn.com/abstract=329140 or http://dx.doi.org/10.2139/ssrn.329140

Ángel Pardo Tornero (Contact Author)

University of Valencia - Department of Financial Economics ( email )

Avda. del Tarongers, s/n
46022 Valencia
Spain

Enric Valor i Micó

University of Valencia - Department of Financial Economics ( email )

Avda. del Tarongers, s/n
46022 Valencia
Spain

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