The Weather Effect: Examining Sky Cloud Cover and Stock Returns in New York City, 1990-2018 | Chhete Sherpa

Psychological evidence supports that individuals’ optimistic opinions are postiviely associated with the number of hours of sunshine. Recent scholarship on behavioral finance has investigated the occurrence of mispricing in financial markets due to weather variables such as sunshine and sky cloud cover. While some concluded that significant negative relationships exist between sky cloud cover and the stock returns, others found no evidence to claim the existence of such weather effects. This paper studies the effect of sky cloud cover in New York City on the daily changes in stock returns at the New York Stock Exchange (NYSE) and Dow Jones Industrial Average (DJIA) from 1990 to 2018.