Many investors and analysts have attempted to find seasonal patterns in the stock market, even if they are rarely able to provide a coherent explanation for the nuggets uncovered by their data mining. But in fact, some seasonal trends can be explained by widespread winter-related depression, according to economist Mark Kamstra.
"It's natural for a large percentage of the population — 10, 20 percent even — to be somewhat or severely affected by seasonal depression. And so it struck us that it might impact investor behavior, because depression leads to anxiety and risk aversion, so if people become risk-averse in the fall, then they might rebalance portfolios, get out of equities, into safer asset like Treasurys," Kamstra, professor of finance at York University, said in an interview with CNBC's "Trading Nation."
Indeed, research has found that "even no-depressed people took fewer risks in the winter, and depressed people particularly took fewer risks in the winter. When we looked at equity exchanges around the world ... you see big swings in asset prices."
As might be expected, the size of the reaction to cold weather varied with how cold the weather is.
"The biggest [seasonal swings] we saw were in places like Sweden, and even in the U.S. and Canada and Europe we saw substantial swings, and opposing swings in the risk-free assets like Treasurys," added the economist, who has previously served at the Federal Reserve Bank of Atlanta.