∗We thank Aldo Rosas for his excellent research assistance. We also thank the editor, Rick Green; an

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relation between morning sunshine at a country’s leading stock exchange and market index stock returns that day at 26 stock ex-changes internationally from 1982-97. Sunshine is strongly signif-icantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. There were pos-itive net-of-transaction costs profits to be made from substantial use of weather-based strategies, but the magnitude of the gains was fairly modest. These findings are difficult to reconcile with fully rational price-setting. I need to laugh, and when the sun is out, I’ve got something I can laugh about. I feel good in a special way; I’m in love and it’s a sunny day