Air pollution, behavioral bias, and the disposition effect in China

By Jennifer Li, Massimo Massa, H. Zhang, Jian Zhang. Journal of Financial Economics, 2019

185 citations recorded by the source corpus.

Abstract Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 accounts in 247 cities, we find that air pollution significantly increases investors’ disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissipation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a potential mechanism.

Subfields: Economics and Econometrics, General Health Professions, Health, Toxicology and Mutagenesis

View Paper: https://www.semanticscholar.org/paper/dc97787b6ca78efe89dbd112f79dca5b36066c9d

How researchers see this paper

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In Economics and Econometrics

1. Shuyu Xue
2. Bohui Zhang
3. Xiaofeng Zhao

In General Health Professions

1. Shuyu Xue
2. Bohui Zhang
3. Xiaofeng Zhao

Citations in the corpus

• Brain drain: The impact of air pollution on firm performance (2020, background): “For example, recent studies show that air pollution intensifies investors’ and financial analysts’ behavioral biases (Chang et al., 2018; Huang et al., 2019; Li et al., 2019; Dong et al., 2021).”