In this article we investigate if stock market returns are related to temperature.

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Research in behavioural finance shows that lower temperature can lead to aggression, while higher temperature can lead to both apathy and aggression Cao and Wei, Cao, M.

Journal of Banking and Finance , Evidence from previous studies suggests that the temperature anomaly is characterized by a negative relationship between stock market returns and temperature.

We consider daily financial and temperature data from five European countries: Austria, Belgium, France, Greece and UK. Using a Generalized Autoregressive Conditional Heteroscedasticity GARCH method, we find a negative relationship between temperature and stock market returns for Austria, Belgium and France only.

Greece and UK show a positive but not significant correlation between temperature and stock market returns.

These findings are strongly recommended to financial managers and investors dealing with European stock indices. Article Purchase 24 hours access for EUR 35, Issue Purchase 30 days access for EUR , Journal Applied Financial Economics Letters Volume 4, - Issue 6.

Christos Floros Department of Economics , University of Portsmouth , Richmond Building, Portland Street, Portsmouth, PO1 3DE, UK Correspondence Christos.

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