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The sunny side of the temperature

This week, after all hope was lost, temperatures are rising and the suns shows himself more often. Time, I supposed, to reconsider the economic effects of sunny weather on the economy. I will not, however, consider the unfortunate ASSET-member who spent a sunny afternoon in his garden, only to see his laptop crashing.

If you are investing in stocks, you might want to look at the weather forecasts. Notwithstanding the most literature on stock prices, prices are based on future expectation, which are determined by the mood of the investors. Sunny weather leads to more optimistic forecasts and drives prices up. Optimistic individuals, who are in a good mood, make more optimistic choices. So, next time you see a sunny Tilburg in the weather forecasts, make sure to buy some stocks.

The same story, by the way, also goes for the purchase of durable goods. Consumers are more optimistic about the future benefits of a car, for instance, and buy more cars if weather is nice. The type of cars bought also matters: in the US, four-wheel cars are more bought in case of snowfall.

Chances are there you will have time for that. While a thriving stock market seems to have beneficial effects on the stock market, a sunny weather can have negative effects for the educational level in an economy.

This has two effects. Research shows that cloudy weather makes academic work more appealing. Prospective students who visit a university on a cloudy day are more willing to work hard, or go to an university where students are ought to work hard, than on a sunny day. Not just current academic work, but also prospective academic work seems less – and partying or having a beer in the park more – appealing if temperatures are high.

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