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The smog that hovers: Air pollution and asset prices

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  • Guo, Lei
  • Han, Xing
  • Li, Youwei

Abstract

Air pollution affects mental well-being (mood) and amplifies behavioral biases. We test the adverse impact of air pollution on asset prices through the lens of dual-listed stocks. Using regression analysis and difference-in-differences tests, we document that a sharp increase of air pollution (in one location) leads to an immediate deterioration of the price parity of dual-listed shares, which is consistent with the air pollution-induced depressive symptoms. Moreover, increased institutional ownership attenuates the adverse impact of air pollution on asset prices, as institutions are less susceptible to air pollution-induced symptoms than individuals.

Suggested Citation

  • Guo, Lei & Han, Xing & Li, Youwei, 2023. "The smog that hovers: Air pollution and asset prices," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000077
    DOI: 10.1016/j.frl.2023.103633
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    References listed on IDEAS

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    More about this item

    Keywords

    Air quality; Pollution; Causal effect; Dual-listed stocks; Asset prices;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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