Does air pollution fuel irrational behaviors in stock investments?

Author:

Zheng BinboORCID,Lu Xinbo,Kung Chih-Chun,Zeng Lulu,Yu PingORCID

Abstract

This paper investigates the influence of air pollution on irrational behaviors in stock trading through behavioral experiments in laboratory, simulating air pollution by burning straw and mosquito coils. The results of this study show that air pollution significantly improves disposition effect and repurchase effect in an asymmetric way, which are thought as irrational behaviors in stock investments, making subjects prefer selling winning stocks (part of disposition effect) and repurchasing stocks that have fallen in price since the sale (part of repurchase effect). Furthermore, regret, a negative emotion, is the psychological mechanism by which air pollution influences the irrational behaviors.

Funder

key research base of philosophy and social sciences in Zhejiang Province

Center for Economic Behavior and Decision-Making (CEBD), Zhejiang University of Finance and Economics

National Natural Science Foundation of China

the Zhejiang Provincial Natural Science Foundation of China

Zhejiang Provincial Social Science Foundation of China

the 18th Student Research Project of Jiangxi University of Finance and Economics

Publisher

Public Library of Science (PLoS)

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