Market Efficiency Hates Bad Weather
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.
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Definitions of common statistics used in our analysis are available here (towards the bottom)