Impact of Sunshine on Stock Returns: Evidence from Finland

Abstract

Investors do not always behave rationally on the market. Recent studies in behavioral finance show that decision making of investors can be at least partly based on feelings and thoughts. On sunny days people are generally in better mood than during rainy days. Generally, investors in good mood tend to be optimistic and carefree. Positive thinking and confidence of investors can diminish risk aversion towards stock market.

The objective of the thesis was to examine the impact of sunny weather on the stock returns in the Finnish stock market. The studied data consisted of the Nasdaq OMX Helsinki indices and the sunshine hours from the Helsinki-Vantaa airport weather station. The selected time frame was ten years from the 1st of January 1998 to the 31st of December 2007. Statistical methods such as Kolmogorov-Smirnov test, regression analysis and Durbin-Watson test were used in the thesis.

The results show that sunny days have no significant impact on stock returns in Helsinki Stock Exchange. The data was measured throughout the ten years and also in selected months to see if there were differences between summer and winter months. There was no correlation between the Nasdaq OMX Helsinki indices and the hours of sunshine. Therefore, the study suggests that the Finnish stock market performs efficiently regardless of the sunshine.