Anna Krivelyova and Cesare Robotti
Working Paper 2003-5b
Revised October 2003

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Explaining movements in daily stock prices is one of the most difficult tasks in modern finance. This paper contributes to the existing literature by documenting the impact of geomagnetic storms on daily stock market returns. A large body of psychological research has shown that geomagnetic storms have a profound effect on people’s moods, and, in turn, people’s moods have been found to be related to human behavior, judgments and decisions about risk. An important finding of this literature is that people often attribute their feelings and emotions to the wrong source, leading to incorrect judgments. Specifically, people affected by geomagnetic storms may be more inclined to sell stocks on stormy days because they incorrectly attribute their bad mood to negative economic prospects rather than bad environmental conditions. Misattribution of mood and pessimistic choices can translate into a relatively higher demand for riskless assets, causing the price of risky assets to fall or to rise less quickly than otherwise. The authors find strong empirical support in favor of a geomagnetic-storm effect in stock returns after controlling for market seasonals and other environmental and behavioral factors. Unusually high levels of geomagnetic activity have a negative, statistically and economically significant effect on the following week’s stock returns for all U.S. stock market indices. Finally, this paper provides evidence of substantially higher returns around the world during periods of quiet geomagnetic activity.

JEL classification: G1

Keywords: stock returns, geomagnetic storms, seasonal affective disorders, misattribution of mood, behavioral finance

The authors have benefited from the suggestions of Mark Kamstra, Lisa Kramer, Dan Waggoner, Dmitry Repin, Mark Fisher, Steve Smith, and Ron Zwickl. Comments from an anonymous referee and seminar participants at the Federal Reserve Bank of Atlanta, University of Virginia, Boston College, Georgia State University, George Washington University, University of Michigan, and University of Arizona are also acknowledged. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to Anna Krivelyova, Department of Economics, Boston College, 140 Commonwealth Avenue, Chestnut Hill, Massachusetts 02134, 404-869-4715,, or Cesare Robotti, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309, 404-498-8543,