Investor relations blog

Cold as ice

Considering the sub-zero temperatures it is hard to believe that this week (March 1st) the meteorological spring actually began, which marks the shift of focus by meteorologists from winter weather to severe weather and warming trends. The culprit of this cold weather is the ‘merger’ over the Atlantic Ocean of storm Emma with the extremely cold Siberian airstream, lovingly referred to as ‘The beast from the East’, leading to many European countries experiencing severe icy and snowy weather and even, as it was in the case of Ireland, leading to a full country lockdown. So not surprisingly a lot of people are yearning for higher temperatures and spring to kick in.

Investors and analysts have speculated and debated the effects of weather on the stock market for a long time. Based on some psychological and clinical evidence, some studies hypothesized that investors’ mood is influenced by meteorological variables and the mood change causes investors to alter their investment behaviour. For instance, on sunny days investors feel more upbeat and are more likely to engage in buying than selling stocks (perhaps due to lower risk aversion), which leads to a higher overall market return (Saunders, 1993; Hirshleifer and Shumway,2001). Conversely, longer nights in the winter cause depression on some investors, who would become more risk-averse and shun risk-taking, the overall result of which is lower stock returns for days with very long nights (Kamstra, Kramer and Levi, 2002).

According to a research paper from M. Cao & J. Wei there’s also a “temperature anomaly” in the stock market. It is known that low temperatures tend to cause aggression, and high temperatures tend to cause aggression, hysteria and apathy.

The authors have analysed 9 market indices for 8 international markets & indeed uncovered a temperature anomaly: lower temperatures encourage aggression in investors & tend to lead to higher stock returns, while higher temperatures bring out apathy in investors and are related to lower stock returns.

Despite this week’s sub-zero temperatures, the ‘temperature’ theory did not prove as successful as investors perhaps would have hoped as this trading week global equity markets actually tumbled amongst others in the wake of US President Trump's planned import tariffs on steel and aluminium - 25% and 10%, respectively - which are raising fears of a potential trade war. Eventually, this trading week in a volatile market the Ageas share increased by +0.7% to EUR 42.12, clearly outperforming the BEL 20 index (-2.6%), the Eurostoxx 50 (-3.4%) as well as the SXIP 600 Insurance index (-3.3%).