A meta-analysis of the international evidence of cloud cover on stock returns

Purpose – This paper provides a meta-analysis of the Hirshleifer and Shumway's results on the casual influence of daily cloud cover on stock index returns for 26 international stock exchanges. It aims to test whether these results are influenced by the location of the stock exchange and the development of the economy. Design/methodology/approach – A conventional meta-analytic procedure is used to synthesise the data. The effect size, of the influence of cloud cover on stock returns, is measured by the Fisher Z correlation coefficient. This is obtained from the t-statistic of the slope coefficient reported in the regression for each country. Two study characteristics are used to differentiate between the 26 stock exchanges. These are the latitude of the city and the per capita Gross Domestic Product of the country. Findings – The influence of cloud cover on stock returns becomes more negative as latitude increases and more negative as per capita Gross Domestic Product increases. A cloud cover effect does not exist at the equator. Practical implications – The implication is that trading rules based on cloud cover will be more profitable at higher latitudes. Originality/value – Meta-analyses are infrequently used in the Finance literature. This paper illustrates their utility.