Air pollution and stock market returns: actual effect vs public attention in an Indian context

IF 1.9 Q2 BUSINESS, FINANCE Review of Behavioral Finance Pub Date : 2024-02-08 DOI:10.1108/rbf-09-2023-0252
Anirudh Singh, Madhumita Chakraborty
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Abstract

PurposeThis paper analyzes how air pollution and the public attention to it influence the returns of stocks in the Indian context.Design/methodology/approachThe study uses firm-level data for the stocks listed on National Stock Exchange in India. Air quality is measured using the Air Quality Index (AQI) values provided by US Embassy and Consulates’ Air Quality Monitor in India. Google Search Volume Index (GSVI) of the relevant terms acts as the measure of public attention. Appropriate regression models are used to address how AQI and attention influence stock returns.FindingsIt is observed that degrading air quality alone is unable to explain the stock returns. It is the combined effect of increasing AQI and subsequent rise in associated public attention that negatively impacts these returns. Returns of firms with poor environment score component in their environmental, social, governance (ESG) scores are more negatively affected compared to firms with higher environment scores.Practical implicationsInvestors can make use of this knowledge to formulate effective trading strategies and ensure higher chances of profitability in the share market.Originality/valueTo the knowledge of the authors, no earlier study has investigated the effects of AQI and attention together to explain stock price movements. The study is conducted in the Indian context providing a unique opportunity to study the behavioral impact of these effects in one of the fastest growing global economies, which is also plagued by an alarming increase in ambient air pollution.
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空气污染与股市回报:印度背景下的实际效果与公众关注度
目的 本文分析了空气污染和公众对空气污染的关注如何影响印度股票的收益。空气质量采用美国驻印度使领馆空气质量监测机构提供的空气质量指数(AQI)值进行测量。相关术语的谷歌搜索量指数(GSVI)作为公众关注度的衡量标准。研究结果表明,空气质量恶化本身无法解释股票回报率。空气质量指数的上升和随之而来的相关公众关注度的上升共同对股票回报率产生了负面影响。与环境得分较高的公司相比,环境、社会和治理(ESG)得分较低的公司的回报受到的负面影响更大。这项研究是在印度背景下进行的,为研究这些效应在全球经济增长最快的国家之一的行为影响提供了一个独特的机会,印度也受到环境空气污染惊人增长的困扰。
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来源期刊
Review of Behavioral Finance
Review of Behavioral Finance BUSINESS, FINANCE-
CiteScore
4.70
自引率
5.00%
发文量
44
期刊介绍: Review of Behavioral Finance publishes high quality original peer-reviewed articles in the area of behavioural finance. The RBF focus is on Behavioural Finance but with a very broad lens looking at how the behavioural attributes of the decision makers influence the financial structure of a company, investors’ portfolios, and the functioning of financial markets. High quality empirical, experimental and/or theoretical research articles as well as well executed literature review articles are considered for publication in the journal.
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