臺大管理論叢 NTU Management Review VOL.30 NO.3

47 NTU Management Review Vol. 30 No. 3 Dec. 2020 other cities. Because investors concentrate their investment in local stocks, the researchers conclude that price-setting investors are weather-sensitive. Individual investors are commonly considered more susceptible to sentiment than institutional investors. It is more likely that these investors are weather-sensitive (Schmittmann, Pirschel, Meyer, and Hackethal, 2015). On the one hand, for the U.S. market, Goetzmann and Zhu (2005) study the individual investor accounts in five U.S. states. They did not find different trading patterns of these investors for cloudy vis-à-vis sunny days. On the other hand, for the German market, Schmittmann et al. (2015) report that individual investors buy more stocks on good weather days and their trading volume is high on bad weather days. Goetzmann, Kim, Kumar, and Wang (2015) acknowledge that institutional and other sophisticated market participants are susceptible to cognitive biases. Therefore, the researchers hypothesize that institutional investors are weather-sensitive. Using trade and survey data, they find that for U.S. markets the trading of institutional investors are affected by weather conditions. Institutional investors with lower exposure to cloud cover tend to buy more stocks. Weather effects can be temporary or permanent (Lee, Jiang, and Indro, 2002). Temporary weather effects influence stock returns directly. These weather effects result from price-pressure effects due to the buying (selling) of investors in good moods (bad moods) or from hold-more effects due to higher (lower) demand for stocks by investors. Because the price-pressure and hold-more effects drive stock returns in opposite directions, the temporary effects represent the net of the two effects. Permanent weather effects drive stock returns indirectly via priced risks. The effects result from the Friedman and create-space effects, which work against each other. For the Friedman effects, concurrent misperception of weather-sensitive investors induces coordinated trades, poor market timing, and large capital losses; the create-space effects are caused by weather-sensitive investors crowding out rational investors and accruing benefits from the momentum of their trades. The permanent effects can be a direct effect. Weather-sensitive investor trades improve or worsen the price adjustment process (Wermers, 1999). The resulting price changes are permanent. Khanthavit (2020) reports that for Thailand’s stock market, good moods contribute to large return autocorrelation and slow price adjustment. Although weather studies have been conducted extensively for national and international markets throughout the world, most studies focus on significance tests.