Positive mood and investment decisions: Evidence from comedy movie attendance in the U.S.

• Positive mood has been shown to affect decision-making under risk.
• This paper employs exposure to comedy movies as a proxy for positive mood.
• An IV approach is used to measure exogenous changes in comedy movie attendance.
• Increases in comedy movie attendance are followed by decreases in US stock returns.
• Sentiment-sensitive stocks experience larger decreases in returns.

Positive mood has been repeatedly shown to affect decision-making under risk. In this study I exploit the time-series variation in the domestic theatrical release of comedy movies as a natural experiment for testing the impact that happy mood (proxied by weekend comedy movie attendance) has on the demand for risky assets (proxied by the performance of the U.S. stock market). Using a sample of data from 1994 to 2010, I estimate that an increase in comedy attendance on a given weekend is followed by a decrease in equity returns on the subsequent Monday, which is consistent with the mood-maintenance hypothesis.

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