In the mood to trade? Weather may influence institutional investors' stock decisions

Weather changes may affect how institutional investors decide on stock plays, according to a new study by a team of finance researchers. Their findings suggest sunny skies put professional investors more in a mood to buy, while cloudy conditions tend to discourage stock purchases.

The researchers conclude that cloudier days increase the perception that individual stocks and the Dow Jones Industrials are overpriced, increasing the inclination for institutions to sell.

The research paper, "Weather-Induced Mood, Institutional Investors, and Stock Returns," has been published in the January 2015 issue of The Review of Financial Studies. The research was collaborated by Case Western Reserve University's Dasol Kim and three other finance professors (William Goetzmann of Yale University, Alok Kumar of University of Miami and Qin Wang of University of Michigan-Dearborn).

Institutional investors represent large organizations, such as banks, mutual funds, labor union funds and finance or insurance companies that make substantial investments in stocks. Kim said the results of the study are surprising, given that professional investors are well regarded for their financial sophistication.

"We focus on institutional investors because of the important role they have in how stock prices are formed in the markets," said Kim, assistant professor of banking and finance at Case Western Reserve's Weatherhead School of Management. "Other studies have already shown that ordinary retail investors are susceptible to psychological biases in their investment decisions. Trying to evaluate similar questions for institutional investors is challenging, because relevant data is hard to come by."

Building on previous findings from psychological studies about the effect of sunshine on mood, the researchers wanted to learn how mood affects professional investor opinions on their stock market investments.

By linking responses to a survey of investors from the Yale Investor Behavior Project of Nobel Prize-winning economist Robert Shiller and institutional stock trade data with historical weather data from the National Oceanic and Atmospheric Administration, the researchers concluded aggregated data shows that seasonably sunnier weather leads to optimistic responses and a willingness to buy.

The research accounts for differences in weather across regions of the country and seasons. They show that these documented mood effects also influence stock prices, and that the observed impact does not persist for long periods of time.

A summary of the research was also recently featured at The Harvard Law School Forum on Corporate Governance and Financial Regulation.

Journal Reference:

W. N. Goetzmann, D. Kim, A. Kumar, Q. Wang. Weather-Induced Mood, Institutional Investors, and Stock Returns. Review of Financial Studies, 2014; 28 (1): 73 DOI: 10.1093/rfs/hhu063

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Off-shore trade winds stall global surface warming ... for the time being

The most powerful trade winds have driven a lot of warmth from climatic change in to the oceans. However when individuals winds slow, that warmth will quickly go back to the climate leading to a rapid increase in global average temps, scientists report.

Warmth saved within the western Gulf Of Mexico triggered by an unparalleled strengthening from the equatorial trade winds seems to become largely accountable for the hiatus in surface warming observed in the last 13 years.

New information released today within the journal Character Global Warming signifies the dramatic acceleration in winds has invigorated the circulation from the Gulf Of Mexico, leading to more warmth to become removed from the atmosphere and moved in to the subsurface sea, while getting cooler waters towards the surface.

"Researchers have lengthy suspected that extra sea warmth uptake has slowed down an upswing of worldwide average temps, however the mechanism behind the hiatus continued to be unclear" stated Professor Matthew England, lead author from the study along with a Chief Investigator in the ARC Center of Excellence for Climate System Science.

"However the warmth uptake is in no way permanent: once the trade wind strength returns to normalcy -- because it inevitably will -- our research indicates warmth will rapidly accumulate within the atmosphere. So global temps look set to increase quickly from the hiatus, coming back towards the levels forecasted within less than ten years.Inch

The strengthening from the Off-shore trade winds started throughout the the nineteen nineties and continues today. Formerly, no climate designs include incorporated a trade wind strengthening from the magnitude observed, which models unsuccessful to capture the hiatus in warming. When the trade winds were added through the scientists, the worldwide average temps very carefully was similar to the findings throughout the hiatus.

"The winds result in extra sea warmth uptake, which delayed warming from the atmosphere. Comprising this wind intensification in model forecasts creates a hiatus in climatic change that's in striking agreement with findings," Prof England stated.

"Regrettably, however, once the hiatus finishes, climatic change looks set to become rapid."

The outcome from the trade winds on global average temps is triggered through the winds forcing warmth to amass below top of the Western Gulf Of Mexico.

"This moving of warmth in to the sea is not so deep, however, and when the winds abate, warmth is came back quickly towards the atmosphere" England describes.

"Climate researchers have lengthy understood that global average temps don't increase in a continuous upward trajectory, rather warming in a number of abrupt stages in between periods with increased-or-less steady temps. Our work helps let you know that this happens," stated Prof England.

"You should be very obvious: the present hiatus offers no comfort -- we're just seeing another pause in warming prior to the next inevitable increase in global temps."

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First measurement flight: Research aircraft HALO explores trade wind clouds

Which climate effects do clouds have? Under what conditions will they warm or awesome the climate? Today, after greater than 5 years of preparation, the specifically outfitted research aircraft HALO (Thin Air and Lengthy Range Research Aircraft) will take off because of its first measurement flight in atmospheric research. Prof. Bjorn Stevens and Dr. Lutz Hirsch in the Max Planck Institute for Meteorology (MPI-M) leave Oberpfaffenhofen in Germany for any ten-hour flight to Barbados.

They'll operate numerous calculating instruments aboard HALO with respect to the German atmospheric research: "Each day we've eagerly looked forward to," states Stevens. "It's the initial pursuit to exploit the novel abilities of HALO to determine vertical profiles of aspects of atmospheric water -- like vapor, liquid and ice, both in cloud and precipitation forms, along with the aerosol contaminants where cloud tiny droplets form -- from the thin air. A brand new era of airborne atmospheric research." The aircraft, outfitted with a lot of advanced technology, is definitely an initiative by German climate and environment research institutions (see below) and it is run by the German Aerospace Center (DLR).

The flight belongs to the NARVAL project (Next-generation Aircraft Remote-Realizing for Validation Studies) and can supply the researchers with increased more information around the metabolic rate of tropical clouds (Fig. 1). The transatlantic plane tickets from Oberpfaffenhofen to Barbados will complement the stationary dimensions from the cloud observatory on Barbados. The collected data will lead to some better knowledge of cloud and precipitation processes and will assist you to reduce questions in climate models.

Remote realizing instruments, situated within the "Belly Pod" beneath the aircraft?s shell, will identify vertical profiles of humidity and temperature and also the distribution of tiny droplets and aerosols (Fig. 2). Furthermore, so-known as dropsondes is going to be launched throughout the flight. These radiosondes usually ascend from Earth with the aid of a weather balloon and perform dimensions enroute with the atmosphere. This time around, they'll be came by parachute and can glide back down.

The very first measurement flight is really a joint project from the MPI-M using the Meteorological Institute from the College Hamburg, DLR, Colleges of Perfume, Leipzig and Heidelberg and also the Forschungszentrum J?lich. It will require the researchers on the lengthy-haul flight to Barbados, in which the MPI-M cloud observatory is situated, and back. Ideally, comparison dimensions using the satellite CloudSat is going to be carried out throughout the plane tickets. The satellite measures the Atlantic clouds in trajectories crosswise towards the flight route. Short plane tickets of HALO in parallel using these satellite trajectories have the ability to ensure the satellite?s dimensions (Fig. 3): the aircraft flies in a lower altitude compared to satellite and may therefore identify the clouds a lot more accurate.

As a whole, the environment route Oberpfaffenhofen -- Barbados and back ought to be flown three occasions in December 2013 ("NARVAL South"). Throughout the 2nd flight, a nearby flight from Barbados eastward with the trade wind clouds is planned. The goal would be to identify clouds which are directly at risk of the Barbados cloud observatory and also to do a comparison towards the land-based cloud observatory data.

The 2nd area of the mission is going to be completed underneath the direction from the College Hamburg in The month of january ("NARVAL North"). HALO depends on Iceland to look at the backsides of fronts within the North Atlantic. The quantity of precipitation around the backsides of fronts is really a questionable subject in science because satellite findings and model information provide spun sentences. "Measured values are missing?? because ships don't sail during these typical storm zones" states principal investigator Prof. Felix Ament in the Center for Earth System Research and Sustainability (CEN), College of Hamburg. "A effective HALO mission could provide important details and eliminate a 'blank spot' into the spotlight of science."

The study aircraft HALO is definitely an initiative by German climate and environment research institutions. HALO is funded by: Federal Secretary of state for Education and Research (BMBF), German Research Foundation (DFG), Helmholtz Association, Max Planck Society, Leibniz Association, Free Condition of Bavaria, Karlsruhe Institute of Technology (Package), GFZ German Research Center for Geosciences, Forschungszentrum J?lich and German Aerospace Center (DLR)

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Japan's first trade deficit since 1980 raises debt doubts (Reuters)

TOKYO (Reuters) – Japan first annual trade deficit in more than 30 years calls into question how much longer the country can rely on exports to help finance a huge public debt without having to turn to fickle foreign investors.

The aftermath of the March earthquake raised fuel import costs while slowing global growth and the yen's strength hit exports, data released on Wednesday showed, swinging the 2011 trade balance into deficit.

Few analysts expect Japan to immediately run a deficit in the current account, which includes trade and returns on the country's huge portfolio of investments abroad. A steady inflow of profits and capital gains from overseas still outweighs the trade deficit.

But the trade figures underscore a broader trend of Japan's declining global competitive edge and a rapidly ageing population, compounding the immediate problem of increased reliance on fuel imports due to the loss of nuclear power.

Only four of the country's 54 nuclear power reactors are running due to public safety fears following the March disaster.

"What it means is that the time when Japan runs out of savings -- 'Sayonara net creditor country' -- that point is coming closer," said Jesper Koll, head of equities research at JPMorgan in Japan.

"It means Japan becomes dependent on global savings to fund its deficit and either the currency weakens or interest rates rise."

That prospect could give added impetus to Prime Minister Yoshihiko Noda's push to double Japan's 5 percent sales tax in two stages by October 2015 to fund the bulging social security costs of a fast-ageing society.

The biggest opposition party, although agreeing with the need for a higher levy, is threatening to block legislation in parliament's upper house in hopes of forcing a general election.

Japan logged a trade deficit of 2.49 trillion yen ($32 billion) for 2011, Ministry of Finance data showed, the first annual deficit since 1980, after the economy was hit by the shock of rising oil prices.

Were Japan to run a current account deficit, it would spell trouble because it would mean the country cannot finance its huge public debt -- already twice the size of its $5 trillion economy -- without overseas funds.

Japanese investors currently hold about 95 percent of Japan's government bonds, which lends some stability to an otherwise unsustainable debt burden.

Domestic buyers are less likely to dump debt at the first whiff of economic trouble, unlike foreign investors, as Europe's debt crisis has shown.

The trade data helped send the yen to a one-month low against the dollar and the euro on Wednesday.

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Graphic on 2011 trade data http://link.reuters.com/mev26s

Dec trade balance http://link.reuters.com/vyq65s

Exports by destination http://link.reuters.com/far65s

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"HOLLOWING OUT," AGEING POPULATION

Total exports shrank 2.7 percent last year while imports surged 12.0 percent, reflecting reduced earnings from goods and services and higher spending on crude and fuel oil. Annual imports of liquefied natural gas hit a record high.

In a sign of the continuing pain from slowing global growth, exports fell 8.0 percent in December from a year earlier, roughly matching a median market forecast for a 7.9 percent drop, due partly to weak shipments of electronics parts.

Imports rose 8.1 percent in December from a year earlier, in line with a 8.0 percent annual gain expected, bringing the trade balance to a deficit of 205.1 billion yen, against 139.7 billion yen expected. It marked the third straight month of deficits.

Japan managed to sustain annual trade surpluses through the Asian financial crisis of the late 1990s and the post-Lehman Brothers global recession that started in late 2008, which makes the 2011 dip into deficit all the more dramatic.

A generation ago, Japan was the world's export juggernaut, churning out a stream of innovative products from the likes of Sony and Toyota.

Much like China today, Japan's bulging trade surplus became a source of friction with the United States and other advanced economies, who pressed Tokyo to allow the yen to rise more rapidly in order to reduce the imbalance.

A 1985 agreement between Japan, the United States and Europe's big economies -- known as the Plaza Accord after the New York hotel where it was signed -- pushed the yen higher against the U.S. dollar.

Many economists argue that sowed the seeds of Japan's current debt woes. After the Plaza Accord, Japan's economy weakened and its central bank slashed interest rates, which contributed to a credit boom that eventually spawned a financial crisis and led to two decades of economic stagnation.

Bank of Japan Governor Masaaki Shirakawa said on Tuesday he did not expect trade deficits to become a pattern, and did not foresee the country's current account balance tipping into the red in the near future.

But Japan's days of logging huge trade surpluses may be over as it relies more on fuel imports and manufacturers move production offshore to cope with rising costs and a strong yen, a trend that may weaken the Japanese currency longer term.

A fast-ageing population also means a growing number of elderly Japanese will be running down their savings.

Chief Cabinet Secretary Osamu Fujimura said the government wants to closely watch the trend of exports and imports.

"There are worries that the yen's strength is driving Japanese industry to go abroad," said Fujimura. "We have to create new industries ... implement comprehensive steps to boost growth. It is important to secure employment within the nation."

($1=77.71 yen)

(Additional writing by Leika Kihara; Editing by Linda Sieg and Emily Kaiser)

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