Journal
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volume 388, Issue 5, Pages 682-690Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.physa.2008.11.017
Keywords
Anomaly; Efficient market hypothesis; Mood; Financial crisis; weather effect
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Funding
- National Research Foundation of Korea [인06B1508] Funding Source: Korea Institute of Science & Technology Information (KISTI), National Science & Technology Information Service (NTIS)
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In this study, we attempted to determine whether a relationship exists between stock returns and the weather variables of temperature, humidity, and cloud cover in the Korean stock market. We delineated three key implications with regard to weather effects. First, after the 1997 financial crisis, the presence of a weather effect disappeared. Second, the inclusion of weather variables helps to model the GJR-GARCH process in the conditional variance. Third, the interaction effects of weather variables fully demonstrate the weather effect, but the interaction effects also vanished after the crisis. Overall, the findings of this study indicate that the weather effect was weakened as the result of heightened market efficiency. (c) 2008 Elsevier B.V. All rights reserved.
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