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How does air pollution-induced fund-manager mood affect stock markets in China?

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  • Wu, Qinqin
  • Chou, Robin K.
  • Lu, Jing

Abstract

We explore how the moods of open-end fund managers affect stock returns and trading activities. We construct a firm-level measure of fund-manager mood induced by local air pollution. We find that a depressed fund-manager mood significantly decreases the contemporaneous stock returns and liquidity. These results hold in a series of robustness checks. Further, we find that the effects of fund-manager mood on stock returns are more pronounced for firms that are difficult to arbitrage. This study shows another potential channel through which air pollution might impact financial markets.

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  • 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).
    • Handle: RePEc:eee:beexfi:v:28:y:2020:i:c:s2214635020303269
    DOI: 10.1016/j.jbef.2020.100399
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    Keywords

    Air pollution; Investor mood; Fund manager; Stock market;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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