Sunny Upside? The Relationship Between Sunshine and Stock Market Returns

Abstract

Weather can have profound effects on economic activity, most obviously agriculture, construction, and transportation. It has also been argued that the daily weather in New York City affects daily U.S. stock returns, a clear challenge to the efficient market presumption that rational investors will not let their assessment of a stock’s value be swayed by whether the sun happens to be shining. Studies claiming to have found a sunshine effect are clouded by differing methodologies which may have been chosen to buttress their results. We examine a fresh set of data and confirm the existence of a New York City sunshine effect which has weakened over time as trading has become more geographically dispersed.