Mood and Judgment of Subjective Probabilities: Evidence from the U.S. Index Option Market |
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Authors: | Doron Kliger and Ori Levy |
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Affiliation: | (1) University of Haifa, Israel |
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Abstract: | Numerous psychological studies show that weather conditions affect people'smood and that mood states are correlated with people's subjective evaluationof future probabilities. In this paper, a new approach is developed and assetmarket data are employed to test the mood-subjective probability relation. Cloudcover and precipitation volume serve as two mood proxies. Our statistical analysissuggests that bad mood states are characterized by investors placing higher probabilitieson adverse events. |
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Keywords: | mood state prices subjective probabilities weather |
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