This paper investigates the role of seasonal affective disorder (SAD) in the seasonal variation of stock market returns. SAD is a medical condition linked to reduced daylight hours in fall and winter, causing depression. Psychological and economic research shows that depression increases risk aversion. The authors find international evidence that stock returns vary seasonally with daylight, a phenomenon they call the SAD effect. Using data from multiple stock exchanges and controlling for known market seasonals and environmental factors, they show that stock returns are significantly related to daylight duration during fall and winter. Patterns at different latitudes and in both hemispheres support a link between seasonal depression and stock returns: higher latitude markets show more pronounced SAD effects, and Southern Hemisphere results are six months out of phase with the Northern Hemisphere. The economic magnitude of the SAD effect is large. The study finds that the SAD effect is significant and substantial, even after controlling for well-known market seasonals and other environmental factors. The SAD effect is measured using the length of night during fall and winter, with results showing that returns are lower in the fall and higher in the winter. The study also explores the robustness of the SAD effect to changes in variable definitions and estimation methods. It considers the influence of SAD in segmented versus integrated capital markets and finds evidence of the SAD effect in the Southern Hemisphere despite potential dampening effects. The results suggest that SAD has a significant impact on stock market returns, with returns being lower in the fall and higher in the winter. The study concludes that the SAD effect is robust to different measures and is not an artifact of heteroskedastic patterns in stock returns. The findings support the idea that seasonal affective disorder has a significant impact on stock market returns.This paper investigates the role of seasonal affective disorder (SAD) in the seasonal variation of stock market returns. SAD is a medical condition linked to reduced daylight hours in fall and winter, causing depression. Psychological and economic research shows that depression increases risk aversion. The authors find international evidence that stock returns vary seasonally with daylight, a phenomenon they call the SAD effect. Using data from multiple stock exchanges and controlling for known market seasonals and environmental factors, they show that stock returns are significantly related to daylight duration during fall and winter. Patterns at different latitudes and in both hemispheres support a link between seasonal depression and stock returns: higher latitude markets show more pronounced SAD effects, and Southern Hemisphere results are six months out of phase with the Northern Hemisphere. The economic magnitude of the SAD effect is large. The study finds that the SAD effect is significant and substantial, even after controlling for well-known market seasonals and other environmental factors. The SAD effect is measured using the length of night during fall and winter, with results showing that returns are lower in the fall and higher in the winter. The study also explores the robustness of the SAD effect to changes in variable definitions and estimation methods. It considers the influence of SAD in segmented versus integrated capital markets and finds evidence of the SAD effect in the Southern Hemisphere despite potential dampening effects. The results suggest that SAD has a significant impact on stock market returns, with returns being lower in the fall and higher in the winter. The study concludes that the SAD effect is robust to different measures and is not an artifact of heteroskedastic patterns in stock returns. The findings support the idea that seasonal affective disorder has a significant impact on stock market returns.