Weather-Induced Positive Sentiment and Insider Trading

Exploiting variations in sunshine exposure near insiders' locations, we find that weather-induced positive sentiment leads to higher insider purchases, albeit with lower performance. Overoptimism induced by abnormally good weather serves as the underlying mechanism. The effect is more pronounced when insiders' purchase decisions are fuelled by their optimistic interpretation of perceived private information. Insiders' personal characteristics, including executive ranks, age, gender, and educational qualifications, also moderate the effect. Our findings highlight the important yet overlooked influence of weather-induced sentiment on insider trading.