Weather affects people’s mood, according to psychological studies. For example, low temperature can cause aggression, whereas high temperature can induce apathy. Therefore, it may be possible that weather-influenced mood, driven by mood’s impact on decision-making, exerts an influence on investment decisions and risk-taking behaviour. Thereby, it might also impact stock market returns. I examine market returns of nine industries in Germany. Empirical results illustrate two findings. First, a statistically significant, negative correlation between market returns and temperature, second, a different effect of weather on industrial sectors is identified. A significant correlation can be found for six out of nine sectors.
Keywords: Stock markets; investor behaviour; weather effect; market returns; decision-making.