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Wondering Wall Street's Mood? Look Up

Several theories have emerged to explain the findings, and some theories contradict others. One school of thought has attributed the better performance of stock markets in winter months to the willingness of people to take more risks when it is cold. Others have pointed to a more prosaic explanation: At least in Europe and North America, people tend to go on vacations during the summer.

Mark J. Kamstra, a finance professor at York University in Toronto, argued that seasonal variations in the markets might be linked with a psychological condition known as seasonal affective disorder, which is linked to diminished amounts of sunlight starting in the fall. Kamstra based his argument on a study he conducted that looked at the number of daylight hours and stock market performance in countries located at different latitudes -- where the amount of sunlight varies naturally. People with seasonal affective disorder tend to become depressed as the days grow shorter.

Since people with depression are often risk-averse, he said, this might explain why markets do poorly in the fall. By November, however, nearly everyone who is going to get the disorder has gotten it (and presumably gotten out of the market) which is why Northern Hemisphere stock markets typically do better between December and February.

Ben Jacobsen, a finance professor at Massey University in Auckland, New Zealand, argued against that explanation, saying his own analysis does not support the theory. Besides, he added in an e-mail, if investors were making mistakes because of a disorder linked to a lack of sunshine, they "would probably be fighting it now using sun beds."

Hirshleifer said his study of 26 stock markets found that sunshine was the only factor that mattered, even in countries that were warm and sunny all year round.

"There is evidence on sunny days that people give larger tips in restaurants, while suicides go up on cloudy days," he said. On bright and cheerful days, people also tend to give more optimistic answers about how long they expect to live and whether their marriages will be stable or end in divorce, he said.

Given the transaction costs of buying and selling stocks, Hirshleifer said it is impractical to use sunshine as a stable investment strategy, although an investor who is planning to sell some stocks anyway might want to time the sale to a sunny day of the week instead of a cloudy day.

"The main lesson for investors is something broader," said Hirshleifer. "It is important to discount for your moods in making investment decisions."

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