By the light of day: The effect of the switch to winter time on stock markets

Abstract

We studied the effect of the shift from Daylight Saving Time (summer time) to Standard Time (winter time) on stock markets around the globe. Using a detailed cross-country data set of daily returns, we documented that (a) market returns on the day following the time shift were significantly lower than those on the corresponding day of the week unaffected by the change; (b) the economic magnitude of the effect was substantial, on average 5–6 times greater than the unconditional mean of market returns; and (c) the outcome was more prominent in local, relatively small markets. Furthermore, we attempted to identify the mechanism underlying the gloomy market returns accompanying the switch to winter time. Our results suggest that the mechanism underlying the effect may be based on the temporary loss of investor internal clock harmony.