Pollution and performance: Do investors make worse trades on hazy days?

Jiekun Huang, Nianhang Xu, Honghai Yu

Research output: Contribution to journalArticlepeer-review


This paper examines the relation between air pollution and individual investors' trading behavior and performance. Using unique data on stock trades by 87,504 individuals from 34 cities in China, we find a negative relation between air pollution and trade performance. This result is obtained after controlling for investor-year fixed effects and date fixed effects, as well as local weather conditions. More strikingly, abnormal trade performance decreases monotonically with the levels indicating the severity of air pollution. Furthermore, we find evidence suggesting that air pollution makes investors more susceptible to the disposition effect and attention-driven buying behavior. Overall, the results highlight a hitherto-unexplored cost that ambient air pollution imposes on stock market investors.

Original languageEnglish (US)
Pages (from-to)4455-4476
Number of pages22
JournalManagement Science
Issue number10
StatePublished - Oct 2020
Externally publishedYes


  • Air pollution
  • Behavioral bias
  • Individual investors
  • Trade performance

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


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