Mood over money: An analysis of the causal link between mood and trading behaviour of Swedish household investors

Abstract: This thesis investigates whether the mood of Swedish online household investors has a causal influence on their trading behaviour, as predicted by decision theory but not empirically established. We also investigate differences in sensitivity to mood within different demographic dimensions. Utilizing panel data on daily volume and value changes for 900 household trading accounts, daily weather forecasts and weather observations across Sweden, and daily blog entries of c.150 000 Swedish blogs, we find a significant and positive causal relationship between mood and an increase in buying/decrease in selling behaviour. Our results are of economic significance for the individual household investor, but not of a magnitude likely to affect asset prices. In addition we develop and test deviations from weather forecasts as a novel continuous mood proxy. Our findings are helpful in explaining the trading behaviour of active online household investors.