Effect of weather on stock market: A literature review and research agenda

Abstract The paper presents a systematic review of the research work, published on the topic of weather effects and stock market behavior. The objectives of the study were to examine the current status of research, by collecting the literature, in the area of weather effects and stock market behavior. In the process, the study would reveal the current status to the budding researchers. In this study, the authors critically assessed and examined fifty one research studies, published from 1993 and 2019, in different regions across the globe. A systematic literature review for this study has been made using Google Scholar. The present study found that number of research works on the weather effects and stock market behavior had increased marginally during the recent time period, especially from the beginning of Twenty First Century. Among the different weather factors, temperature was wildly used for research. Finally, this paper reveals some significant research gap to advance the research agenda for future research.


PUBLIC INTEREST STATEMENT
Investors' sentiment is an important research direction of behavioral finance. Many research studies in different parts of the world have attempted to investigate investors' sentiment. Normally individual investors make investment decisions based on their risk tolerance level, but some investors often deviate from their original investment decisions due to certain sentiments that influence these decisions. In general, both internal and external factors have an impact on the overall risk tolerance level of investors'. This study summaries the research publications from 1993 to 2019 done in the reputed journals in the area of weather factors and investors sentiments. The present study provides the collection, classification and comprehensive bibliography of the research work on weather effect and stock market, which might be helpful for the academicians, practitioners and future researchers. This would be helpful for studying the existing research work, as well as for considering future researches on the same subject area. JEL Codes: G02; G11; G12.

Introduction
The classical finance theory, namely, Portfolio Theory (Markowitz, 1952) and Capital Asset Pricing Model Theory (Sharpe, 1964) clarified that the returns from the stock market were determined, by the fluctuations in the share price, due to micro or macroeconomic fundamentals in the rational backgrounds. The investors mostly do make investment decisions by rational methods, but those decisions have been influenced by only publically available information relating to stock pricing (Lu & Chou, 2012;Chang et al., 2008).But, Lucey and Dowling (2005) argued that the investors' behavior is the main factor for their investment decision-making process also concurred. Behavioral finance argued that the stock prices were determined by investors' psychology .The weather could also affect the investors' moods and thus, their behavior played critical role in financial markets (Keef & Roush, 2002;M. Cao & Wei, 2005;Floros, 2008;. Different studies proved the fact that environmental factors did influence the individual decisionmaking process (Cunningham, 1979;Hirshleifer, 2001;Kamstra et al., 2003).Besides, different weather factors, were the most predominant environmental factors influencing the day to day activities of individuals (Saunders, 1993;Watson, 2000;Denissen et al., 2008).A clear sky created a good mood (Cunningham, 1979;Schwarz & Clore, 1983).People experienced more satisfaction from a bright day. Symeonidis et al.found that cloudy days naturally influenced individual moods. But some academic researchers claim that changes of individual mood were influenced by different weather factors (Leger, 1994;Coren, 1996).Weather factors could create the predisposition towards in particular individual behaviors (P.A. Bell & R.A. Baron, 1976; M.A. Allen & G.J. Fischer, 1978;M.R. Cunningham, 1979). Weather factors significantly influenced individual moods, which could be proven by songs, daily routines and others activities (F. Shahzad, 2019).
Many research studies clearly asserted that the people made ideal judgments when they were in a good mood and people's mood played a vital role in the decision-making process (Johnson & Tversky, 1983;Isen, 1993;Hirshleifer & Shumway, 2003;M. Cao & Wei, 2005;Simonsohn, 2007). Forgas et al., (2009)observed that weather factors induced negative mood. Petersen,(1937)also argued that cloud cover influenced the individuals in their decision-making.
In recent days also, academic researchers have identified that individual emotional state did have strong significant influence, over individual investment decisions, in the financial markets (Roll, 1992;Hirshleifer, 2001;.Number of studies have examined the effects of investors' moods, derived from different sources, such as Ramazan (Bialkowski et al., 2012;Munusamy, 2019), Air pollution international sports tournaments (Edmans et al., 2007;Kaplanski & Levy, 2010;Chang et al., 2012) and seasonal depression (Kamstra et al., 2003).Besides, there are many studies that proved the fact that a statistically significant effect in the stock market was observed, due to weather factors. From the literature, relating to different weather factors, it is evident that some studies used cloud cover (snow falling, raining,) to examine its impact on stock price (Stoll & Whaley, 1990;Fabozzi & Ma, 1995;Loughran & Schultz, 2004;Hirshleifer & Shumway, 2003;Kang et al., 2010;Lu & Chou, 2012). A few other studies were based on temperature and stock market movement (Keef & Roush, 2002;M. Cao & Wei, 2005;Floros, 2008;Kathiravan, Raja et al., 2018).Majority of the literature clearly indicate that there was significant effect of investors' behavior on the stock market returns and movements.
The main purpose of the present review study was to invite the attention of the researchers, towards the topic on weather factors and the stock market movement, which are not presently considered in the mainstream research discussion. Hence an attempt has been made in this paper to review earlier research works, undertaken in the area of weather factors and stock market. This work has been arranged into six sections as follows. Section two discusses the motivation of the study, section three describes an objectives of the study, section four provides details about design and data, followed by the present study for attaining the study objectives, section five explains the earlier literature on weather factors and stock market, and section six offers conclusion, important suggestion and scope for the future research study.

Motivation of the study
In the global warming era, the weather factors are considered an important element in the day to day activities of human being and our ecosystem as well. The theory of weather factors and stock market movement and their relationship, have become subject of the study recently across the globe, particularly in USA, China, UK, and the European countries. This theory is now applied in developing countries like India also. Therefore, this paper assembled earlier research publications, to overview the status of global trends of research, in the area of weather factors and stock markets movements and this study also displays these studies for easy access. The present work was also conducted with an intention of bringing out the various methodologies, used in various countries, for evaluating the impact of various weather factors on international stock markets to determine the direction of future research in the same area.

The objective of the study
The main aim of the paper was to review the earlier research works, published in the area of climate change and investment decisions. In order to achieve the objectives, this study has examined the present research status, by collecting literature in the area of weather effects and stock market behavior, to provide easy access to the budding researchers.

Data
Around 51 research articles were reviewed in the area of weather factors and stock market investment across the globe and the study covered a period of more than 45, years from 1993 to 2019. Published research articles were collected from databases like Science direct (https:// www.sciencedirect.com/), and google scholar (https://scholar.google.com/). Table 1, provides the detailed distribution of different components of research, like study period, studied country, different variables, weather and stock market and findings relating to weather factors and the stock market. It is to be noted that the sample of 51 papers, written by 147, authors working at different institutions across the globe, was reviewed for the purpose of this study.

Methodology
This study propose to review the published research work, relating to weather factors and stock market behavior, from different sources, including electronic databases, web sites (science direct, and google scholar), and academic research journals, during the period from 1993 to 2019. It is to be noted that totally 75 research documents (Journal articles, working paper, and thesis) were downloaded from different sources as said above. But, the present study considered only 51 publications, published in refereed journals. It did not consider rest of 24 research papers presented in the national and international conferences, Thesis (doctoral and master's) and published and unpublished working papers. The present study had adopted the Systematic Literature Review (SLR), developed by Tranfield et al. (2003) and applied different studies (Singh & Kumar, 2014). The process of review of published literature consisted of three stages, as given in Figure 1.
The sample of 51 research articles symbolizes the importance of weather factors and stock market and they were selected from databases, during the study period. The earlier research articles were classified under year wise, country wise etc.   Step-1

Identification and Selection of Research Papers
Step-2

Grouping of Selected Research Works
Step-3 Reporting of Selected Findings  Table 3 present the results of the country-wise distribution of publications, on weather factors and the stock market behaviour, during the study period, from 1993 to 2019. It is understood from the Table 3 that out of 51 studies, published globally, eight studies were from China, six from USA, five from UK and India each, four from Germany and Thailand, three each from Turkey, Australia, Ireland and Portugal and two from Belgium, France, Greece, New Zealand, Sweden, Korea, Malaysia, Indonesia, Finland, Sri Lanka, Japan, Hong Kong and Taiwan. The remaining countries like Canada and Czech Republic, published one paper each. It is interesting to record that, developed countries like the USA, China, and the UK had published more number of articles. Most importantly, the Southern Region dominated the publications in the area of weather factors and stock market behaviour.

Methodology/econometric tools adopted for data analysis
The frequency of tools used, for the data analysis in the research papers, relating to weather factors and stock market behaviour, during the study period, from 1993 to 2019, are presented in Table 4. It could be seen from the Table and the Figure that majority of research papers used Descriptive Statistics, for testing normality (33%), followed by regression (25%) for testing relationship between weather factors and stock markets behaviour GARCH model was used to the tune of 13%, for testing volatility, and Unit Root Test (10%), for testing the stationarity between weather factors and stock market behavior. There were other tests also used in few studies but they were not widely used. The other tools included ARMA, Auxiliary Analyses, Bin Tests, CAR, Correlation, Correlation Matrix, Duncan's Multiple Range Test, Factor Analysis, F-test, Granger Causality, Kruskal

Studies based on weather variable
Different weather variables were considered and they are presented in Table 5. It is understood from the Table that out of 51 studies considered by this study, 30% (35) of studies were related to temperatures, an important weather variables, followed by 18% of studies being related to humidity, 16 % of study were related to wind speed, and 14% of study to cloud cover. But only 10% of the studies were related to sun shine, and 8% of the study to precipitation. Rest of variables were related to weather factors like rainfall by 3% of studies and Sky cover by 1% of the study. It is interesting to note that because of global warming and the greenhouse effect, majority of academic researchers were sensitive to the impact of temperature, and these research studies identified found a temperature as an important factor, impacting the stock market.

Conclusion and future research implications
All human activities would be affected by the climate/environment changes, and certainly, weather does affect the individual decision-making, and their investment decision-making process. This paper primarily aimed to review the earlier research works, published in the area of weather factors and investment decisions. Present study identified 51 scholarly research papers, published by different journals from 1993 to 2019. The aim of the present study was to analyze the important characteristics of studies, which had contributed more in understanding the particular domain of weather and stock market. The present study adopted SLR model. It is clear that the research works carried out in the area