Abstract:
This paper tries to explore the consequence of meteorological conditions
on the stock market of Bangladesh by using several econometric techniques like
the Ordinary Least Squares (OLS) model, General Autoregressive Conditional
Heteroskedastic (GARCH) model, and Cross-correlation analysis of daily data
for the period of 2018-2021. Exploration from the OLS model, the temperature is
positively related to daily returns, daily turnover value, and daily market cap
value; humidity is positively related to turnover value only. From
cross-correlation analysis, the positive association among daily returns,
humidity, and temperature; positive association between market cap and
temperature; positive association among turnover value, humidity, and
temperature. From the GARCH model, statistically significant positive
relationship between temperature and returns from the stock market; a
statistically significant positive relationship among temperature, humidity, and
turnover value from the stock market, and a statistically insignificant relationship
among temperature, humidity, and market cap value from the stock market. This
is the first attempt to analyze the effect of meteorological conditions (humidity and
temperature) on the stock market of developing nations like Bangladesh with
different econometric tools. By using the results of this paper, traders will think
about their moods before trading onto the stock market; the regulatory body of the
stock market will modify the trading system according to investors’ moods and
meteorological conditions.
Keywords: Meteorological conditions, Stock market, OLS, GARCH, Turnover
value, Market capitalization.
