The Effect of Weather Conditions on IPO Performance
Kozyrakis, Ioannis
Vaenterlis, Antonios
A variety of studies have demonstrated over the past decade that environmental conditions, such as the weather and the Seasonal Affective Disorder (SAD), have a significant effect on the market behavior of listed stocks. The present study extends the empirical literature in this area by investigating for the first time the effect of weather on Initial Public Offering (IPO) performance using an extensive dataset from 6 countries (US, UK, Singapore, Malaysia, France and Australia) between 1982 and 1997. In order to control for known effects we use a number of control variables which reflect both financial data and behavioral conditions. Our results indicate that the weather has a statistically significant effect on the behavior of the IPO market. In particular, irregularly high cloudiness on a particular day is associated with lower levels of IPO underpricing. However, the short term volatility and stock performance the 5 days following the IPO, is not affected by cloudiness. In line with a previous study, SAD has also a significant effect on IPO unpderpricing. The new result here is that we find that this behavioral factor also affects short time IPO volatility.
