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Fresh Air Eases Work – The Effect of Air Quality on Individual Investor Activity

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  • Steffen Meyer
  • Michaela Pagel

Abstract

This paper shows that air quality has a significantly negative effect on the likelihood of individual investors to sit down, log in, and trade in their brokerage accounts controlling for investor-, weather-, traffic-, and market-specific factors. In perspective, a one standard deviation increase in fine particulate matter leads to the same reduction in the probability of logging in and trading as a one standard deviation increase in sunshine. We document this effect for low levels of pollution that are commonly found throughout the developed world. As individual investor trading can be a proxy for everyday cognitively-demanding tasks such as office work, our findings suggest that the negative effects of pollution on white-collar work productivity are much more severe than previously thought. To our knowledge, this is the first study to demonstrate a negative impact of pollution on a measure of white-collar productivity at the individual level in a western country.

Suggested Citation

  • Steffen Meyer & Michaela Pagel, 2017. "Fresh Air Eases Work – The Effect of Air Quality on Individual Investor Activity," NBER Working Papers 24048, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24048
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    Cited by:

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    2. Wu, Qinqin & Chou, Robin K. & Lu, Jing, 2020. "How does air pollution-induced fund-manager mood affect stock markets in China?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    3. Diane Alexander & Hannes Schwandt, 2022. "The Impact of Car Pollution on Infant and Child Health: Evidence from Emissions Cheating [Management and Shocks to Worker Productivity]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 2872-2910.
    4. Luis Sarmiento & Thorsten Burandt & Konstantin Löffler & Pao-Yu Oei, 2019. "Analyzing Scenarios for the Integration of Renewable Energy Sources in the Mexican Energy System—An Application of the Global Energy System Model (GENeSYS-MOD)," Energies, MDPI, vol. 12(17), pages 1-24, August.
    5. Zhonghua Huang & Xuejun Du, 2022. "Does air pollution affect investor cognition and land valuation? Evidence from the Chinese land market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 593-613, June.
    6. Sarmiento, Luis & Burandt, Thorsten & Löffler, Konstantin & Oei, Pao-Yu, 2019. "Analyzing Scenarios for the Integration of Renewable Energy Sources in the Mexican Energy System," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(2019), pages 1-1.
    7. Hanwen Chen & Siyi Liu & Xin Liu & Jiani Wang, 2022. "Opportunistic timing of management earnings forecasts during the COVID‐19 crisis in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1495-1533, April.
    8. La Nauze, Andrea & Severnini, Edson R., 2021. "Air Pollution and Adult Cognition: Evidence from Brain Training," IZA Discussion Papers 14353, Institute of Labor Economics (IZA).
    9. Luis Sarmiento, 2020. "Waiting for My Sentence: Air Pollution and the Productivity of Court Rulings," Discussion Papers of DIW Berlin 1878, DIW Berlin, German Institute for Economic Research.
    10. Bellani, Luna & Ceolotto, Stefano & Elsner, Benjamin & Pestel, Nico, 2021. "Air Pollution Affects Decision-Making: Evidence from the Ballot Box," IZA Discussion Papers 14718, Institute of Labor Economics (IZA).
    11. Soo Hong Chew & Haoming Liu & Alberto Salvo, 2021. "Adversity-hope hypothesis: Air pollution raises lottery demand in China," Journal of Risk and Uncertainty, Springer, vol. 62(3), pages 247-280, June.
    12. Künn, Steffen & Palacios, Juan & Pestel, Nico, 2019. "Indoor Air Quality and Cognitive Performance," IZA Discussion Papers 12632, Institute of Labor Economics (IZA).
    13. Xue, Shuyu & Zhang, Bohui & Zhao, Xiaofeng, 2021. "Brain drain: The impact of air pollution on firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    14. Luis Sarmiento, 2022. "Air pollution and the productivity of high‐skill labor: evidence from court hearings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(1), pages 301-332, January.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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