Publication Type
Journal Article
Version
publishedVersion
Publication Date
10-2021
Abstract
Inspired by the recent health science findings that air pollution affects mental health and cognition, we examine whether air pollution can intensify the cognitive bias observed in the financial markets. Based on a proprietary data set obtained from a large Chinese mutual fund family consisting of complete trading information for more than 773,198 ac-counts in 247 cities, we find that air pollution significantly increases investors' disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissi-pation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a potential mechanism. (c) 2019 Elsevier B.V. All rights reserved.
Keywords
Air pollution, The disposition effect, Mutual funds
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
142
Issue
2
First Page
641
Last Page
673
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2019.09.003
Publisher
Elsevier
Citation
LI, Jennifer (Jie); MASSA, Massimo; ZHANG, Hong; and ZHANG, Jian.
Air pollution, behavioral bias, and the disposition effect in China. (2021). Journal of Financial Economics. 142, (2), 641-673.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7047
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.