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Does air pollution fuel irrational behaviors in stock investments?

Author

Listed:
  • Binbo Zheng
  • Xinbo Lu
  • Chih-Chun Kung
  • Lulu Zeng
  • Ping Yu

Abstract

This paper investigates the influence of air pollution on irrational behaviors in stock trading through behavioral experiments in laboratory, simulating air pollution by burning straw and mosquito coils. The results of this study show that air pollution significantly improves disposition effect and repurchase effect in an asymmetric way, which are thought as irrational behaviors in stock investments, making subjects prefer selling winning stocks (part of disposition effect) and repurchasing stocks that have fallen in price since the sale (part of repurchase effect). Furthermore, regret, a negative emotion, is the psychological mechanism by which air pollution influences the irrational behaviors.

Suggested Citation

  • Binbo Zheng & Xinbo Lu & Chih-Chun Kung & Lulu Zeng & Ping Yu, 2024. "Does air pollution fuel irrational behaviors in stock investments?," PLOS ONE, Public Library of Science, vol. 19(6), pages 1-19, June.
    • Handle: RePEc:plo:pone00:0304553
    DOI: 10.1371/journal.pone.0304553
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    References listed on IDEAS

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    1. Arden Pope III, C., 1989. "Respiratory disease associated with community air pollution and a steel mill, Utah Valley," American Journal of Public Health, American Public Health Association, vol. 79(5), pages 623-628.
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