It is finally, officially, summertime. The warmer weather and bright sunshine mean you should never leave home without your sunglasses, sunscreen, and stock options. 

That’s right. Just as summertime brightens people’s moods, it can also decrease their aversion [1] to risk and encourage higher investments, specifically for seasoned equity offerings (SEOs), according to new research from the University of Portsmouth’s Center for Innovation and Sustainable Finance and other contributors. 

SEOs are sales of additional shares by a publicly traded company that has already issued an initial public offering (IPO). Companies return to the market and offer SEOs as a way to raise capital, and this additional funding can be used to expand, reduce debt, research and develop, merge, or a number of other reasons. SEOs are necessary fundraisers for many companies and critical for a functioning modern economy. 

When exposed to even a small increase in sunshine intensity, investors made higher bids, causing bid discounts to decline by at least 2% in the primary market, where newly issued securities are bought and sold for the first time. Higher bid prices are bad news for the stock market because they can spark overvaluation concerns [2], reduce buying opportunities for other investors, and lower demand for other investments. Generally, they can lead investors to risky situations not justified by asset values.

Professor Jia Liu, Professor of Accounting and Financing at the University of Portsmouth and Director of the Center for Innovation and Sustainable Finance, said her team’s findings show that investors must better understand how their behaviors are affected by non-market influences and how those behaviors can ripple [3] throughout the stock market, especially as the negative effects of climate change intensify. 

“Maintaining the stability of markets could depend upon our understanding of this phenomenon, since the onset of climate change might have an increasingly destabilizing [4] impact on the judgment of investors and market-makers, with unpredictable consequences [5] for global trading.”