Pollution and Performance: Do Investors Make Worse Trades on Hazy Days?

• 成果类型: Article
• 署名作者: Huang, Jiekun; Xu, Nianhang; Yu, Honghai
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; Renmin University of China; Nanjing University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3402
• 发表日期: 2020
• 页码: 4455-4476
• 关键词: individual investors; Air pollution; trade performance; behavioral bias

摘要

This paper examines the relation between air pollution and individual investors' trading behavior and performance. Using unique data on stock trades by 87,504 individuals from 34 cities in China, we find a negative relation between air pollution and trade performance. This result is obtained after controlling for investor-year fixed effects and date fixed effects, as well as local weather conditions. More strikingly, abnormal trade performance decreases monotonically with the levels indicating the severity of air pollution. Furthermore, we find evidence suggesting that air pollution makes investors more susceptible to the disposition effect and attention-driven buying behavior. Overall, the results highlight a hitherto-unexplored cost that ambient air pollution imposes on stock market investors.