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

Time Paths of Weather-Induced Mood Effects on Stock Returns 48 Recently, Khanthavit (2019) applies the methodology of Lee et al. (2002) to test for significance of the weather effects in the Thai stock market and examines their temporary and permanent contributions to the returns. The researcher finds significant weather effects. The temporary contribution is dominant. However, neither temporary nor permanent contributions are significant. It is important to understand the time behaviors of weather effects on stock returns. These behaviors are implications for trading strategies (De Long, Shleifer, Summers, and Waldmann, 1990), asset pricing (Hirshleifer, 2001), and government policy formulation (Daniel, Hirshleifer, and Teoh, 2002). In this study, I analyze the dynamics of stock returns and weather variables by a p th - order vector autoregressive (VAR(p)) model. For the estimation, I use daily returns on the Stock Exchange of Thailand (SET) index portfolio and seven of Bangkok’s weather variables: air pressure, cloud cover, ground visibility, rainfall, relative humidity, temperature, and wind speed. The SET‒a broker market, is the only stock market in Thailand. It is located in Bangkok, where most stock investors live and trade. Stock News Online (2015) reports that there are 1,134,500 open stock accounts in February 2015, and 82% of these accounts are in the Bangkok metropolitan area. Therefore, Bangkok weather affects most investors. The market is considered an individual investor-driven market. From 1992 to 2017, the average trading share of this investor group are 58.44%. The remaining investor groups are local institutional investors, local proprietary investors, and foreign investors. Their average shares are 6.92%, 8.20%, and 26.44%, respectively. The weather conditions under consideration are drawn from the meteorological station at Bangkok’s Don Muang Airport. Bangkok covers an area of 1,569 square kilometers. The airport is 25 kilometers from the stock market’s former location and is 22 kilometers from its current location. Due to the size of Bangkok and the distance from the weather station to the market’s locations, the observed weather variables are proxies for the true variables that affect investor moods. For the sample period from February 17, 1992, to December 29, 2017 (6,335 trading- day observations), I observe no price reversals and therefore conclude that there are no temporary weather effects. The infinite sum of the impulse responses is different from zero. The significant weather effects are permanent. Further analyses suggest that the permanent effects influence the returns indirectly from the impact on their volatility of the weather’s structural shock.