Most people are to some degree affected by weather conditions.  Winter in, say, New York, Minneapolis, or Chicago can literally have a depressing effect on individuals, whereas springtime brings with it brighter outlooks owing to the promise of longer days, gradually warming temperatures, and sunshine.   Behavioral finance researchers are interested in how various weather conditions impinge on investor decisions.

Researchers at Stanford Business School recently published a scholarly paper that reported on their investigation of the work-related behavior of 5,456 brokerage-firm stock analysts, during 1997-2004, under differing weather scenarios.   In all, there were 636,000 observations.  The Stanford researchers knew where the analysts were located so they were able to determine the weather for each of the observations.

According to the Wall Street Journal (November 9, 2015), weather had a pronounced effect on the analysts’ actions.  For example, analysts experiencing bad weather were lackadaisical compare to analysts having good weather.  The former were “9% to 18% less likely to issue an annual earnings forecast; a recommendation to buy, hold, or sell; or a target-price recommendation.”

The findings are consistent with “research on weather and moods, which has found that dreary days cause mild depression, and can reduce cognitive capacity, increase apathy, and slow activity.”

How stock investors, rather than stock analysts, tend to act under different weather conditions has not been demonstrated empirically, as constructing a study to find out is difficult at best.  The main obstacle is ascertaining with sufficient precision where the investors are located.

Turning to horse-race bettors, an interesting hypothesis to test would be that warm weather fosters more bettors and also increases per-capita handle.  This thesis would be hard to test because racetracks offer vastly more graded stakes in months with favorable weather and graded stakes attract bettors.  Moreover, several of the best racetracks hold meets entirely or mostly in the summer.

However, intuitively, it seems that a prototypical average bettor, particularly in a snowbird state, would not be as keen on playing the January card at Aqueduct, or Hawthorne, or Laurel, as he or she would be to play Saratoga in August or Keeneland in April or October.

While drawing hard and fast conclusions about the effects of weather on horse-race bettors in general is not possible, one finding from behavioral finance is a certainty:  people investing in anything—stocks, bonds, alternatives, etc.–or wagering on horses should avoid the activity when his or her prevailing mood is unusually downbeat. ..and weather is one of the exogenous causes of moods.

Buoyant moods, of course, can also be hazardous to financial decision making.  For instance, radiant sunshine and warm environs by the calming sea at Del Mar in August can create a false sense of being able to do no wrong.

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