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To test for weather effects on stock returns and volatility, weather-related mood indexes were constructed from the principal components (PCs) of weather variables to obtain clean measures of investors’ moods. Using the daily data on the Stock Exchange of Thailand portfolio index and Bangkok weather variables from February 17, 1992, to December 30, 2016, significant weather effects were found on both stock returns and volatility. Returns were driven by the rainfall-related, fourth PC, while the fifth PC—most sensitive to ground visibility and wind speed—drove volatility. However, the first PC was not significant.
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