A new research that has been conducted in the University of Haifa found out that shares that are issued to the public during spring and summer, when daylight stays for more hours, rise higher after the issue more than shares that are issued in the darker, gloomy days of winter and fall.

It seems that “seasonal depression” influences the price of shares in the stock exchange: shares that have been issued in the fall and winter, when the days are shorter and there are less hours of daylight, went up after the issue less than shares that have been issued during spring and summer. This is the conclusion of a new study that has been conducted in the University of Haifa. The study also demonstrates that after a few months, the accumulated performance of shares get balanced, which reinforces the assumption that daylight hours at the stage of the issue have an influence on performance.

Economists and people from the capital market understand today that one has to take into consideration psychological factors when applying economic models and during decision-making processes, in addition to rational economic considerations. The fact that our state of mind is influenced by the duration of daylight has been known in the field of psychology. Biological studies have found that the melatonin hormone, whose release is influenced by the different conditions of light over the seasons of the year, influences a person’s mood. Therefore, the current study aimed at investigating the assumption whether the seasons of the year, which influence a person’s mood through their influence of the melatonin release, would influence the behavior of investors in emissions in the stock exchange.

The research was conducted by Prof. Doron Kliger, Head of the Department of Economics in the University of Haifa, Dr. Gregory Gurevitz, and Prof. Abraham Haim, Head of the Department of Natural Resources and Environmental Management, and it was based upon data of more than 1500 initial public offerings (IPO), which had been issued in the US between the years 1975-1984, and were in an average scope of about $15 million.

According to Prof. Kliger, the investors’ behavior in IPO emissions was not random, since the shares in these issues are traded initially in the stock exchange only after the emission, and therefore the investors cannot base their buying decisions on previous prices that the people who trade in shares usually have. In this situation one can examine in a more refined way whether the season of the year has, or does not have, an influence, through mood, on pricing securities. The results of the study show that there is correlation between the season of the issue of the IPO and its performance. The average yield in the first day of commerce of shares which were issued in “gloomy” days was lower by about 5-10% than shares issued in “happy” days. Prof. Kliger says that the economic significance of this difference for an average emission is about one million dollars in current values, that is, an IPO share which was issued in the winter or fall, yielded one million dollars less at the time of its emission.

Nevertheless, within three months the accumulated yield of both groups becomes equal. That is to say that the relative over-yield of the shares which were issued in “happy” days fades away. Later, the shares which were issued in “happy” days continue with deficient performances, a well-known phenomenon in IPO shares, in an intensity that is not lower than that of the shares that were issued in “gloomy” days.

We have found an additional parameter one has to take into consideration that influences investors, the season of the year in which the share was issued. “We already know that our mood influences many of our behaviors, and now we have found an activity in which its influence is most significant in the economic field as well,” concludes Prof. Kliger.

(YWN – Israel Desk, Jerusalem)