What does the sun have to do with how we spend our money?

Cowry Authors • 2 min read

Surely something as abstract as the weather wouldn’t get in the way of the important life decisions we make, including what to invest in? Think again.

Recent research has found a significant relationship between seasonal affective disorder (SAD) and the financial market in the UK, specifically in relation to the investment patterns within the stock market. SAD has been identified as one of the biggest influencers of people’s mood globally (Denissen et al., 2008; Rosenthal, 1998). SAD sufferers tend to lack energy and feel depressed and as a result have a more pessimistic outlook on life which leads to a tendency to avoid risky investments.

Findings show that SAD leads to lower investment in stocks which are traditionally higher risk investments and a higher investment in much safer government bonds. When people recover from SAD in the summer months, we see higher investments in stocks and lower government bond returns (Cheng, 2015).

A body of research gained from laboratory experiments has shown that people are more likely to gamble when they are in a good mood. At the same time, people are in a better mood when they experience unexpected positive outcomes, such as a beautifully sunny day following days of cloud and rain. Together, these separate findings led researchers to investigate whether these unexpected positive outcomes, such as better weather, caused a change in risky behaviour. To test this effect in the real world, they studied the number of lottery tickets bought across 174 zip codes in New York to see whether more lottery tickets were bought on days when the weather surpassed expectations. The results showed a relationship between unexpectedly good weather and an increase in sales of lottery tickets (Otto et al., 2016). They suggested that the large-scale data set offered the statistical power and precision to suggest a causation between these factors and not merely a correlation. They explained these findings by stating that when we’re in a good mood for some unrelated reason, we experience a greater sense of optimism and this leads to a decision to gamble.

This research comes with the hazard warning that more sun doesn’t lead to an increase in the chance of winning the lottery!

Cheng, X. (2015) Are UK Financial Markets SAD? A Behavioural Finance Analysis. PhD thesis, University of Sheffield.

Otto, R., Fleming, S.M., & Glimcher, P.W. (2016) Unexpected but Incidental Positive Outcomes Predict Real-World

Gambling, Psychological Science 1–13.

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