Sunny days fuel risky investments: Study

By Our Reporter
Representational Photo by Nicholas Cappello on Unsplash

Weather isn’t something typically considered when making financial decisions. However, a new study from the University of South Australia suggests that sunny days might be a secret driver behind increased investment in high-risk stocks.

Researchers have discovered a fascinating link between pleasant weather and a surge in investments in so-called lottery-like stocks. These stocks, although cheap, offer a slim chance of substantial gains, akin to lottery tickets. While they present the possibility of high returns, the risks involved are significant.

The study, led by Dr Reza Bradrania, Senior Lecturer of Finance at UniSA’s Centre for Markets, Values and Inclusion, indicates that sunny weather can heavily influence investors’ mood and behaviour. Previous psychological studies have shown that weather can account for about 40% of daily mood variations, with sunshine playing a particularly potent role.

Dr Bradrania explains, “Good moods often lead to riskier behaviour. Given that weather significantly impacts human mood, we wanted to explore its relationship with the demand for lottery-like stocks, which are high-risk and have the allure of gambling products like casino games or lotto tickets.”

He adds, “The hypothesis is that investors in a sunny, upbeat mood tend to have more optimistic expectations about the future payoff of these stocks. This study is crucial as it sheds light on how weather can affect investors’ judgement and financial decisions.”

This pioneering research, the first of its kind to explore weather’s impact on investment decisions, involved gathering 36 years of weather data, including variables such as hourly sky cloud cover, wind speed, rain depth, and air temperature from major weather stations across US cities. The price data of common stocks from 1983 to 2019 was also analysed.

The findings reveal that on days with pleasant weather, investors are more likely to take risks and invest in lottery-like stocks, resulting in increased demand and higher prices for these stocks. However, these prices often adjust later, leading to significant losses for investors.

Dr Bradrania points out, “Overoptimism can lead to overconfidence. Overconfident investors tend to trade lottery-like stocks more frequently. The research suggests that weather influences our gambling preferences and financial judgments. It offers valuable insights for making investment decisions based on weather conditions.”

This intriguing study underscores the unexpected ways that our environment can shape financial behaviour, providing a unique perspective on the factors influencing market trends and investment choices.

Support independent community journalism. Support The Indian Sun.

Follow The Indian Sun on X | InstagramFacebook


Donate To The Indian Sun

Dear Reader,

The Indian Sun is an independent organisation committed to community journalism. We have, through the years, been able to reach a wide audience especially with the growth of social media, where we also have a strong presence. With platforms such as YouTube videos, we have been able to engage in different forms of storytelling. However, the past few years, like many media organisations around the world, it has not been an easy path. We have a greater challenge. We believe community journalism is very important for a multicultural country like Australia. We’re not able to do everything, but we aim for some of the most interesting stories and journalism of quality. We call upon readers like you to support us and make any contribution. Do make a DONATION NOW so we can continue with the volume and quality journalism that we are able to practice.

Thank you for your support.

Best wishes,
Team The Indian Sun