This paper examines the relationship between daily stock returns and sunshine at 26 international stock exchanges from 1982-97. It finds that sunshine is strongly and significantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. The paper suggests that weather-based strategies could generate statistically significant but economically modest improvements in portfolio Sharpe ratios. However, these findings are difficult to reconcile with fully rational price-setting. The paper discusses psychological evidence suggesting that sunny weather is associated with upbeat mood, which may influence investor behavior and stock returns. It argues that mood affects judgment and behavior, and that people often misattribute their mood to the wrong environmental feature. This misattribution may lead to incorrect investment decisions, with stock prices fluctuating in response to investor mood. The paper also explores the effects of other weather conditions, such as rain and snow, on stock returns. It finds that sunshine remains significant, and that after controlling for sunshine, rain and snow are essentially unrelated to returns. The paper concludes that while the weather effect does not represent a risk-free arbitrage opportunity, it is possible to improve the Sharpe ratio of the market portfolio by trading on the weather, even when there are transactions costs. These results are difficult to reconcile with fully rational price-setting. The paper suggests that investors could benefit from becoming aware of their moods to avoid mood-based errors in their judgments and trades. It also suggests that weather or other mood proxies may affect the stock market response to news events.This paper examines the relationship between daily stock returns and sunshine at 26 international stock exchanges from 1982-97. It finds that sunshine is strongly and significantly correlated with daily stock returns. After controlling for sunshine, rain and snow are unrelated to returns. The paper suggests that weather-based strategies could generate statistically significant but economically modest improvements in portfolio Sharpe ratios. However, these findings are difficult to reconcile with fully rational price-setting. The paper discusses psychological evidence suggesting that sunny weather is associated with upbeat mood, which may influence investor behavior and stock returns. It argues that mood affects judgment and behavior, and that people often misattribute their mood to the wrong environmental feature. This misattribution may lead to incorrect investment decisions, with stock prices fluctuating in response to investor mood. The paper also explores the effects of other weather conditions, such as rain and snow, on stock returns. It finds that sunshine remains significant, and that after controlling for sunshine, rain and snow are essentially unrelated to returns. The paper concludes that while the weather effect does not represent a risk-free arbitrage opportunity, it is possible to improve the Sharpe ratio of the market portfolio by trading on the weather, even when there are transactions costs. These results are difficult to reconcile with fully rational price-setting. The paper suggests that investors could benefit from becoming aware of their moods to avoid mood-based errors in their judgments and trades. It also suggests that weather or other mood proxies may affect the stock market response to news events.