Weather-Induced Mood Effects on Stock Returns


  • Anya Khanthavit Thammasat Business School, Thammasat University, Thailand


Instrumental Variable Estimation, Mood Effects, Weather Effects


Weather effects exist, as weather influences investors’ mood, compelling them to raise or lower asset prices. These effects are indirect, as weather affects returns via mood – weather does not directly affect returns. Weather effects are, in fact, weather-induced mood effects. In this study, I estimated a model of weather-induced mood effects in its full form, which was the only way to identify and estimate the model. The model in its reduced from had exactly the same form as did the direct weather-effect model.

Using the daily returns on Thailand’s stock index portfolios, this study found that all weather variables – air pressure, cloud cover, ground visibility, rainfall, relative humidity, temperature, and wind speed – significantly affected mood. The mood effects on the returns were time varying; they were wandering and significant in the early sample period – up to 2009 – but disappearing in the later period – from 2010 onward. The findings help to explain why previous studies reported insignificant effects on returns from certain weather variables even though the psychological literature suggested that these variables were important.


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How to Cite

Khanthavit, A. (2018). Weather-Induced Mood Effects on Stock Returns. Thammasat Review, 20(1), 1–18. Retrieved from