Sunny Money On Wall Street

By Barbara Kiviat

Stocks rally when the sun shines, according to the latest issue of the Journal of Finance. David Hirshleifer of Ohio State University and Tyler Shumway of the University of Michigan looked at stock markets in 26 countries over 16 years and found that performance goes up as cloud cover goes down, bolstering a claim first made a decade ago. The reason is what you might think: sunny weather leads to a sunny disposition and a more optimistic outlook on prospects. There's no money in sunny, though. Transaction costs will probably erase any benefit gained trading on nice days. The real lesson: "Somebody out there is trading on emotion," says Shumway. "That shouldn't be you." --By Barbara Kiviat