Relationship among Weather Effects, Investors' Moods and Stock Market Risk: An Analysis of Bull and Bear Markets in Taiwan, Japan and Hong Kong

Abstract

Literature shows that weather encourages people to engage in certain behaviors and that three factors, particularly sunshine, temperature, and humidity, have the greatest psychological impact on investors (Edgar Howarth and Michael S. Hoffman, 1984). On the contrary, some results indicate that the weather has insignificant effect on investors (Ben Jacobsen and Wessel Marquering, 2008; Lu Jing Lu and Robin K. Chou, 2012).Hence, our research used three weather variables, namely temperature, humidity, and cloud cover, to detect the effects of extreme weather conditions on stock returns. The sample data used in this study consisted of the intraday data, with thirty minutes stock price, of Taiwan, Japan, and Hong Kong from 2012 to 2015.By taking into consideration the effects of asymmetric volatility, we employed the GJR-GARCH model to capture stock market returns. In addition, as the volatility of the stock market is affected by a number of economic factors, this study included the market situation, whether a bear or bull market type, as an additional condition to explore whether market condition renders the weather effects more significant. The results of this research support relevant literatures and can be used as a reference for investors.

Key words: GJR-GARCH, Market situation, Whether effect, Investors sentiment.
JEL: C22, G14.

Literatura pokazuje da vremenski uslovi podstiču ljude da se angažuju u određenim ponašanjima i da tri faktora, posebno sunčeva svetlost, temperatura i vlažnost, imaju najveći psihološki uticaj na investitore (Edgar Howarth and Michael S. Hoffman 1984). Sa druge strane, neki rezultati ukazuju na to da vremenski uslovi imaju neznatan uticaj na investitore (Ben Jacobsen and Wessel Marquering 2008; Jing Lu and Robin K. Chou 2012). Stoga, u našem istraživanju koristimo tri vremenske promenljive, konkretno temperaturu, vlažnost i pokrivenost oblaka, kako bi otkrili efekte ekstremnih vremenskih uslova na povraćaj investiranja u akcije. Podaci korišćeni u ovom radu se odnose na dnevne podatke o ceni akcija na svakih trideset minuta u Tajvanu, Japanau i Hong Kongu od 2012. do 2015. godine. Uzimajući u obzir efekte asimetrične volatilnosti, koristili smo model GJR-GARCH kako bi odredili povraćaj na investiranje u akcije. Pored toga, s obzirom da na stabilnost berzanskog tržišta utiče niz ekonomskih faktora, ovo istraživanje uključuje tržišnu situaciju, bilo da se radi o tipu tržišta za koje je karakteristično ponašanje medveda ili o tipu tržišta za koje je karakteristično ponašanje bikova, kao dodatni uslov da se ispita da li tržišno stanje utiče na značajnost efekata vremenskih uslova. Rezultati ovog istraživanja podržavaju relevantna istraživanja iz ove oblasti i mogu se koristiti kao referenca za investitore.

Ključne reči: GJR-GARCH, stanje na tržištu, vremenski efekat, raspoloženje investitora.