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

67 NTU Management Review Vol. 30 No. 3 Dec. 2020 market, the structural changes may be due to economic development or market microstructure. Global warming is a long-term rise in the average global temperature. It leads to frequent extreme weather and climate events such as heat waves, heavy rainfalls, and severe floods and droughts. Extreme weather conditions affect the mood of investors and induced weather effects in stock returns (e.g., Kang et al., 2010). Novy-Marx (2014) report that, as a proxy of global warming, the global temperature anomaly could predict stock returns. One explanation for the weather effects is the changing risk aversion of weather- sensitive investors from weather-driven moods (Bassi et al., 2013; Kamstra et al., 2003). It is important to note that investors’ relative risk aversion varies with wealth. Good and bad economies imply more or less the wealth of investors. This mechanism links changes in the economic conditions with how the investors react to weather and how time paths behave over time with the economies. Moreover, the relationship of stock returns with certain variables may change due to economic conditions. For example, Chu (1997) finds that for Taiwan that the fast boom in the economy changes the stock return-earnings relationship from one period to the next. So, the return-weather relationship may change with the economy as well. Table 6 suggests that the local individual and institutional investors are weather sensitive. Their responses to the weather are different. Due to the much larger trading share of the individual investors, the response of the institutional investors never manifests Impulse Response (Day) Cumulative Response (250 Days) 5 6 7 8 9 -1.97E-04 -7.55E-05 -1.87E-05 3.25E-06 1.17E-05 0.0154 17.2806 13.5594 10.6591 9.0316 7.6167 60.8007*** 0.0011 5.80E-04 3.64E-04 2.06E-04 1.26E-04 -0.1273 13.3842 11.3597 9.5810 8.2187 7.1544 25.75032 1.45E-04 6.65E-05 2.76E-05 1.17E-05 4.87E-06 0.0671 9.7518 8.4091 6.7355 5.5757 4.3953 31.9284 90%, 95%, and 99% confidence levels, respectively. The full tables are available from the author upon request.