Air pollution and mediation effects in stock market,longitudinal evidence from China |
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| Institution: | 1. Department of Mathematics and School of Economics and Management, University of Bologna, Bologna, Italy;2. Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy;3. Department of Economics, University of Bamberg, Germany;1. Department of Accountancy and Finance at University of Antwerp, Stadscampus Prinsstraat 13 S.B.329, 2000 Antwerpen, Belgium;2. College of Business, University of Akron, Akron, OH, USA;3. School of Accounting and Finance, University of Vaasa, Wolffintie 34, 65200 Vaasa, Finland;4. Department of Data Science, Economics and Finance at EDHEC Business School, 24 avenue Gustave Delory, 59057 Roubaix Cedex 1, France;1. Faculty of Business, City University of Macau, Macau, China;2. School of Business, Macau University of Science and Technology, Macau, China;1. Middle East Technical University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Dumlup?nar Bulvar?, Ankara 06800, Turkey;2. Bilkent University, Faculty of Business Administration, Department of Management, Bilkent, Ankara 06800, Turkey |
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| Abstract: | By obtaining a novel proprietary city-level panel dataset of stock returns and trading volume in China, this article investigates the effect of air pollution on the stock market while avoiding the possible confounding factors reported in previous similar studies. The analysis finds that there are significant negative effects generated by air pollution on stock returns and trading volume, and these effects manifest themselves on successive days. Air pollution affects stock returns on the same day, which then mediates the effect of air pollution on trading volume on the next day. Similar negative effects are also found in several different pollutants. Our results validate the negative relationship of air pollution on the stock market in literature with longitudinal evidence, and illustrate the steps of the air pollution effect in the stock market. |
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