Abstract
Previous studies have demonstrated that investor sentiment affects trading behavior and stock returns, and is correlated with seasons and weather. In addition, a great deal of evidence supports the main systematic factors of the Fama-French (FF) three-factor model. This study presents both the seasonal affective disorder (SAD) model and the SAD-FF model to examine the influence of season and weather on Taiwan stock returns from 1991 to 2010. To determine whether SAD variables affect stock returns, the SAD and SAD-FF models include the additional, explanatory variable of the business cycle factor.