Institutional Investors Trade Differently When The Sun Is Out

Unseasonally good weather makes institutional investors more likely to buy, and bad weather causes them to view stocks as overpriced

It’s no secret that institutional investors are just as susceptible to cognitive bias as the rest of us, but it turns out that the biases we normally think of, like different risk tolerances or attribution error, aren’t the whole story. Even the so-called smart money will pay more for stocks if the sun is shining.

“We show that deseasonalized cloud cover increases the likelihood of perceived overpricing in both individual stocks and the Dow Jones Industrial Average (DJIA) among institutional investors [and] institutional investors with lower exposure to deseasonalized cloud cover exhibit a greater propensity to buy,” write write William Goetzmann,...