Weather, Mood, and Professional Work Output: Large Sample Evidence

• In Event: Financial Reporting and Capital Markets

Abstract

We exploit a large-scale quasi-experiment to investigate whether unpleasant environmental conditions impact individuals’ economic decision-making and work output. In particular, we examine how stock market analysts experiencing different weather conditions across the United States perform the same tasks at the same time and using similar inputs. We draw from psychology to develop a new prediction that weather-induced moods reduce market participants’ activity levels. We also investigate an existing prediction in financial economics that weather-induced negative moods induce pessimism. We find support for both predictions that do not appear to be driven by physically disruptive weather. Additional price association tests indicate that our new prediction—that unpleasant weather reduces activity—potentially delays equilibrium price adjustments following earnings announcements. Our study contributes to financial economics by providing new evidence both extending and reconfirming predictions of a relation between unpleasant weather and market activities. We contribute to psychology and economics more broadly by providing large-scale evidence of an impact of weather-induced mood on labor output.

Authors

• Ed deHaan, Stanford University

• Joshua Madsen, University of Minnesota

• Joseph Piotroski, Stanford