A 53 page detailed discussion on Stock Markets and Geomagnetic Storms by Federal Reserve Bank of Atlanta

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http://www.frbatlanta.org/invoke.cfm?objectid=AFD46B63-2852-4812-BE83E6D0C777F4BF&method=display

 

Abstract

 

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.

 

 

 

 

Rajeev Upadhye

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