Do Weather-Induced Moods Affect the Processing of Earnings News?
Building on research in psychology, we predict that unpleasant weather negatively affects capital market participants’ moods and activity levels, causing a muted response to information events…
The table below highlights that unpleasant weather seems to be correlated with slower market reactions. For example, in columns 5-8, the authors look at PEAD, or post earnings annoucement drift, which is the tendency for stocks to earn abnormal returns following unexpected earnings (positive surprise = positive drift, and vice versa). The authors document a relationship between PEAD and bad weather, suggesting that stock prices have stronger drift in the direction of the unexpected earnings when the weather stinks.
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.
