On Aug. 21, the moon will block the sun in its path across the United States, giving viewers in a 70-mile wide strip between Oregon and South Carolina an unprecedented view.
For the investors who live in that path, it’s an exciting time, and in some cases lucrative. Airbnb reports that 40,000 homes in the path of totality have been booked through the site, with some homeowners asking for hundreds of dollars, if not thousands, for their properties.
The cities within the path are trying to cash in, as well. Hopkinsvile, Kentucky, a town of 33,000, has dubbed itself “Eclipseville” and named a solar eclipse event consultant.
Mark Kamstra, Canadian Securities Institute Research Foundation term professor of finance at the Schulich School of Business at York University, Toronto, wonders about the impact such a big event could have on financial markets.
Kamstra released a paper for the Federal Reserve Bank of Atlanta with colleagues Lisa Kramer and Maurice Levi in 2003 that found a seasonal trend in risk aversion. Seasonal affective disorder is already a well-documented psychological condition, and the paper found that as daylight hours increased or decreased, investors became more or less risk averse based on the amount of sunlight they were exposed to.
Events that result in “synchronization” — large-scale events that effect many people at the same time, like daylight saving time — can have a similar market-moving impact, according to Kamstra.
“These kinds of changes are changes that can synchronize everyone, put them all in a similar mood or frame of mind,” he said. “If the mood tilts toward being anxious or depressed, risky assets tend to fall in value or at least don’t appreciate over time as quickly.”
The solar eclipse satisfies a few of these criteria, he explained. “It does affect a lot of people all at the same time. … It is synchronizing a lot of people in terms of their experience in a way that doesn’t happen a lot.”
What about events that inspire feelings of excitement? As Kamstra noted, we’re a long way from the time when a solar eclipse would trigger panic and fear among more a more superstitious population.
“It could produce a lot of optimism and willingness to take on risk,” Kamstra said of the eclipse, adding that his own research focuses on how negative emotions affect the markets.
Ultimately, “what’s speculative” about the eclipse, he said, is “does it really affect people’s mood much? … I don’t know if it would really affect people’s mood much, and if it did, would it make them more anxious or depressed? I don’t know that either.”