Air pollution and mediation effects in stock market, longitudinal evidence from China

Alan Xu

International Review of Financial Analysis, 2022, vol. 83, issue C

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.

Keywords: Air pollution; Stock returns; Trading volume; Mediation effect (search for similar items in EconPapers)
JEL-codes: D91 G12 G41 Q53 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002101

DOI: 10.1016/j.irfa.2022.102252

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