Weathering the stock market
Highly trained individuals arenâ€™t susceptible to the vagaries that influence the amateur, right? Top level tennis players have a mental resolve that is impervious to the behaviour of the player at the end of the court. Politicians maintain a steely focus to implement sound public policy without a thought for what the opinion polls say about them. Journalists check every fact going into a story in their relentless quest for truth regardless of demands on their time. Actuallyâ€¦maybe highly trained individuals are open to outside influences but surely not when it comes to making financial decisionsâ€¦or are they?
In a new study, researchers from Yale University, the University of Miami, and the University of Michigan investigated â€œinstitutional investorsâ€, who make investments in stocks on behalf of banks, mutual funds or labour unions. These people were chosen because they, of all investors, should be immune to psychological influences on their investment decisions.
The researchers looked at institutional stock trade data and compared it to historical weather data gathered from the National Oceanic and Atmospheric Administration in the US.
If institutional investors are hard-nosed and impervious to external influences, making their investment decisions based solely on hard financial data, then there should of course be no correlation between investments and weatherâ€¦but there was a link.
The analysis showed that sunnier weather leads to optimistic responses and a greater willingness to buy. Cloudy days however increase the perception that individual stocks and the market overall are overpriced and there is an increased inclination for institutions to sell.
There are no guarantees of course but, if you are planning to float your private company on the stock exchange, best to wait for a sunny day.