Weather and intraday patterns in stock returns and trading activity

We examine the relation between weather in New York City and intraday returns and trading patterns of NYSE stocks. While stock returns arc found to be generally lower on cloudier days, cloud cover has a significant influence on stock returns only M the market open. There arc significantly more seller-initiated trades when there is more cloud cover at the market open. which is consistent with the return results. Cloudy skies arc associated with higher volatility and less market depth over the entire trading day. Finally. Cloud cover is not significantly correlated with spread measures and turnover ratios. The findings overall suggest that weather has a significant influence oil investors' intraday trading behavior. (C) 2007 Elsevier B.V. All rights reserved.