Springtime for Stocks: how the weather affects your investment mood

The Weather Plays a Role in How We Invest

Weather has the power to affects our mood – this is a commonly known psychological fact. We are more likely to smile in the sunshine and frown in the rain, no big news so far.

But did you know that the weather can also significantly affect your investment behavior? Now that springtime is upon us and the sunshine is making even the most downtrodden stock or currency‘s future look brighter, we thought we’d take a look at all the ways that the change in weather can change your investment decisions.

Risky business

According to this academic study, investors tend to feel more optimistic on sunny days, which in turn leads them to take more risks, open more positions and take on more exposure in the markets. All because of a few rays of sunlight! So the next time you feel like staking it all on the next “monster stock”, take a peek out the window to see if you’re just doing it because it’s nice out.

Bulls in the sun

The same paper also mentions a wide market effect that occurs as a result of riskier investor behavior. Over a 40 year old period, stock prices have tended to go up whenever it was sunny in New York City and back down when the clouds reappeared to cast a shadow on investors’ mood. Curiously enough, this effect is augmented in time of financial instability. So whereas between 2000 – 2008 this effect is quite negligible, it once again became pronounced after 2008, when the global financial crisis hit in full swing.