Open AccessJournal Article10.2139/SSRN.1875645

Does Mood Affect Trading Behavior

- 05 Aug 2015

TL;DR: In this paper, the authors used account level stock trading data from all investors in Finland, a country with significant variation in weather and length of day, and found strong seasonal lower frequency patterns that seem connected to vacations.

Abstract: The assumption that mood affects investors’ behavior in the field is gaining acceptance due to experimental studies and papers linking stock returns with environmental variables, such as weather and length of day. To identify mood effects this paper utilizes account level stock trading data from all investors in Finland, a country with significant variation in weather and length of day. While some weather-related mood variables and calendar effects are individually significant, little of the day-to-day variation in trading is collectively explained by all such factors. In contrast, we find strong seasonal lower frequency patterns that seem connected to vacations.

AI Agents for this Paper

Find similar papers on Google Scholar, PubMed and Arxiv
Write a critical review of this paper
Analyze citations of this paper to find unaddressed research gaps

Most frequently asked questions

1. What contributions have the authors mentioned in the paper "Does mood affect trading behavior?" ?

In this paper, the importance of mood effects in empirical field data consisting of investors ' real stock market trades in Finland was evaluated.

2. What are the future works in "Does mood affect trading behavior?" ?

Hence, also the environmental mood effects could turn out statistically significant when being evaluated jointly across multiple samples in future studies.. To their knowledge, this is the first paper to study the effect of mood on trading behavior with comprehensive data.. Thus, the authors conclude that from the standpoint of overall economic significance, neither day-to-day mood 28 changes unconnected to any fundamentals nor the classical calendar effects seem to exert a major influence on investors ’ trading decisions.. The variables that the authors study can be thought of as instruments of investor sentiment.

Figure 1. Location of Finland. This figure depicts the Mollweide projection (priority on accurate representation of area rather than direction) of Finland, Europe and eastern United States. The vertical distance from the southern tip to the northern tip of Finland (1,110 kilometers, or 690 miles) is approximately equal to the vertical distance from Jacksonville Florida to the New York City.

Table 7 Results from cross-sectional regressions for SAD by gender

Figure 4. Daylight and excess buy/sell ratio. The excess buy/sell ratio is defined as weekly # of buys/( weekly # of buys + weekly # of sells) – annual # of buys/( annual # of buys + annual # of sells). The data include all transactions by domestic investors in Finland. The number of trades for calculating each graph are 8,405,166 (individuals in the whole country; also including individuals with unknown domicile); 6,262,902 (individuals in southern Finland); 666,987 (individuals in northern Finland); 6,539,397 (institutions in the whole country); 6,200,096 (institutions in southern Finland) and 80,496 (institutions in northern Finland).

Table 1 Descriptive statistics on the investor data

Figure 3. Geographical representation for the number of trades in the sample. The left-hand graph plots the number of trades for domestic individual investors with one dot representing 1,000 trades over the sample period from January 1, 1995 through November 28, 2002. The right-hand figure plots the number of trades for domestic institutional investors with all institutional investors pooled into one sample.

Figure 5. Excess volume ratio (weekly number of trades/annual number of trades) by month and latitude, based on all transactions by domestic investors in Finland. The number of observations is 170,872 for households and 12,257 for institutions.

Citations

Journal Article•10.1016/J.JFINECO.2020.02.003

Mood Betas and Seasonalities in Stock Returns

David Hirshleifer, +2 more

- 01 Jul 2020

- Journal of Financial Economics

TL;DR: In this paper, the authors hypothesize that assets' different sensitivities to investor mood explain the cross-sectional seasonality of stock returns and imply other seasonalities, such as the periodic outperformance of certain stocks during the same calendar months or weekdays.

...read moreread less

158

Journal Article•10.1080/1351847X.2020.1742758

How emotions influence behavior in financial markets: a conceptual analysis and emotion-based account of buy-sell preferences

Darren Duxbury, +3 more

- 19 Mar 2020

- European Journal of Finance

TL;DR: In this paper, a conceptual analysis and account of how emotions influence behavior in financial markets is presented, and the authors first review the need for such research and motivate their approach and establish the need to such research.

...read moreread less

Journal Article•10.1093/ROF/RFU020

The Impact of Weather on German Retail Investors

Jochen M. Schmittmann, +3 more

- 01 May 2015

- Review of Finance

TL;DR: In this article, the authors explore the impact of weather on trading by individual investors over a time span of 94 months, and analyze daily trading records of individual investors Controlling for various investor- and market-specific factors, they find a twofold effect of weather.

...read moreread less

Journal Article•10.1016/J.JFINECO.2021.07.004

Ambiguity about volatility and investor behavior

Dimitrios Kostopoulos, +2 more

- 11 Jul 2021

- Journal of Financial Economics

TL;DR: In this paper, the authors used the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015 to find that an increase in ambiguity is associated with increased investor activity.

...read moreread less

Journal Article•10.1016/j.irfa.2022.102112

Will temperature change reduce stock returns? Evidence from China

Yumeng Yan, +3 more

- 01 Mar 2022

- International Review of Financial Analys...

TL;DR: In this article , the authors used temperature data at the locations of listed companies in China from 2007 to 2019, as well as stock price data and financial data to study the impact of the continuous rise in temperature on listed companies and the determinants and mechanism of the impact.

...read moreread less

...

Expand

References

Journal Article•10.1111/J.1540-6261.2007.01232.X

Giving Content to Investor Sentiment: The Role of Media in the Stock Market

Paul C. Tetlock

- 01 Jun 2007

- Journal of Finance

TL;DR: The authors quantitatively measure the interactions between the media and the stock market using daily content from a popular Wall Street Journal column and find that high media pessimism predicts downward pressure on market prices followed by a reversion to fundamentals.

...read moreread less

3.7K

Journal Article•10.1037/0033-2909.117.1.39

Mood and judgment: the affect infusion model (AIM).

Joseph P. Forgas

- 01 Jan 1995

- Psychological Bulletin

TL;DR: A new integrative theory, the affect infusion model (AIM), is proposed as a comprehensive explanation of these effects of affective states in social judgments, and predicts that judgments requiring heuristic or substantive processing are more likely to be infused by affect than are direct access or motivated judgments.

...read moreread less

3.4K

•Journal Article•10.1257/JEP.21.2.129

Investor Sentiment in the Stock Market

Malcolm Baker, +1 more

- 29 Jun 2007

- Journal of Economic Perspectives

TL;DR: In this article, the authors develop a top-down approach to measure investor sentiment and quantify its effects, and show that it is quite possible to measure sentiment and that waves of sentiment have clearly discernible, important, and regular effects on individual firms and on the stock market as a whole.

...read moreread less

3.1K

•Journal Article•10.1111/0022-1082.00379

Investor Psychology and Asset Pricing

David Hirshleifer

- 01 Aug 2001

- Journal of Finance

TL;DR: In this paper, the authors present a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models.

...read moreread less

2.2K

Journal Article•10.1016/0304-405X(80)90021-5

Stock returns and the weekend effect

Kenneth R. French

- 01 Mar 1980

- Journal of Financial Economics

TL;DR: In this paper, the authors examined two alternative models of the process generating stock returns: calendar time hypothesis and trading time hypothesis, and found that returns are generated only during active trading and the expected return is the same for each day of the week.

...read moreread less

2.1K

...

Expand

Does Mood Affect Trading Behavior

Chat with Paper

AI Agents for this Paper

Most frequently asked questions

1. What contributions have the authors mentioned in the paper "Does mood affect trading behavior?" ?

2. What are the future works in "Does mood affect trading behavior?" ?

Figures

Citations

Mood Betas and Seasonalities in Stock Returns

How emotions influence behavior in financial markets: a conceptual analysis and emotion-based account of buy-sell preferences

The Impact of Weather on German Retail Investors

Ambiguity about volatility and investor behavior

Will temperature change reduce stock returns? Evidence from China

References

Giving Content to Investor Sentiment: The Role of Media in the Stock Market

Mood and judgment: the affect infusion model (AIM).

Investor Sentiment in the Stock Market

Investor Psychology and Asset Pricing

Stock returns and the weekend effect

Related Papers (5)

Does mood affect trading behavior

Weather and SAD related mood effects on the financial market

Weather, Biorhythms and Stock Returns - Some Preliminary Irish Evidence

Weather, Mood, and Stock Market Expectations: When Does Mood Affect Investor Sentiment?

Twitter mood predicts the stock market.