Weather and Financial Risk-Taking: Is Happiness the Channel?

Weather variables, in particular sunshine, are found to be strongly correlated with financial variables. I consider self-reported happiness as a channel through which sunshine affects financial variables. I examine the influence of happiness on risk-taking behavior by instrumenting individual happiness with regional sunshine. I find that happy people appear to be more risk-averse in financial decisions and (accordingly) choose safer investments. Happy people take more time for making decisions and have more self-control. Happy people also expect a longer life and (accordingly) seem more concerned about the future than the present and expect less inflation.