Cold weather means strong returns?

Does cold weather freeze stock market returns?

A study done by Ming Dong and Andréanne Tremblay of York University considered this question.

The researchers predicted that warm weather would positively affect returns because of increased optimism. They found that was true, particularly where people can spend time comfortably outside.

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But, surprisingly, cold weather boosts returns as well. Dong and Tremblay hypothesize that this could be because people become more aggressive and take more risks in poor weather.

They say, “The magnitude of the weather effects on stock returns is substantial enough that daily fluctuations of weather conditions are capable of generating high volatility in the stock market.”

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The authors compared weather patterns to the behaviour of Thomson Reuters’ global equity index.

Read the study here.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.