Publication Type
Journal Article
Version
publishedVersion
Publication Date
2-2025
Abstract
We examine whether fund managers overestimate carbon risk when they are exposed to local air pollution. We find that air pollution causes managers to underweight stocks of high-emission firms. The effects are stronger for less salient scopes of carbon emissions, among managers located in pro-environmental states, and among those likely to be surprised by air pollution—consistent with the idea that managers revise their beliefs about climate-transition risk following their exposure to air pollution. Carbon-intensive stocks sold by managers who are exposed to air pollution subsequently outperform stocks that they buy, suggesting that such underweighting is costly to fund investors.
Keywords
Air Quality Index, Mutual Funds, Carbon Divestment, Belief Revision
Discipline
Business Law, Public Responsibility, and Ethics | Finance | Finance and Financial Management
Research Areas
Finance
Publication
Review of Accounting Studies
First Page
1
Last Page
28
ISSN
1380-6653
Identifier
10.1007/s11142-025-09875-7
Publisher
Springer
Citation
HUYNH, Thanh; LI, Frank Weikai; and XIA, Ying.
Something in the air: Does air pollution affect fund managers’ carbon divestment?. (2025). Review of Accounting Studies. 1-28.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6815
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
External URL
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3908963
Additional URL
https://doi.org/10.1007/s11142-025-09875-7
Included in
Business Law, Public Responsibility, and Ethics Commons, Finance Commons, Finance and Financial Management Commons
