Autumn 2003 / Leading Edge
Taking Stock of SAD

Sufferers of seasonal depression appear more willing to take financial risks in winter


People with seasonal affective disorder (SAD) tend to stick to safer investments in the fall but take bigger risks with their money in winter, researchers have found. “We’ve uncovered a very large economically and statistically significant seasonal pattern in stock markets that hasn’t been recognized until now,” says U of T finance professor Lisa Kramer, who led the study with Mark Kamstra, a financial economist at the Federal Reserve Bank of Atlanta in Georgia, and Maurice Levi, a professor of international finance at the University of British Columbia in Vancouver.

SAD is a disorder that causes varying degrees of depression due to reduced levels of daylight; it affects about 15 per cent of the world population.

After analyzing data from nine stock markets worldwide, the researchers found that people affected by SAD are more risk-averse in the fall, when days are growing shorter. When days start to lengthen in the winter, people appear more willing to take financial risks. The researchers discovered that this seasonal stock market variation also holds true in the Southern Hemisphere, where seasons are reversed. Fluctuations are more pronounced in countries at higher latitudes than in those near the equator. The American Economic Review published the study in its March issue.


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