@article{d941e7cca0d34c67b243f53fa9b83b26,
title = "Air pollution, behavioral bias, and the disposition effect in China",
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 accounts in 247 cities, we find that air pollution significantly increases investors{\textquoteright} disposition effects. Analysis based on two plausible exogenous variations in air quality (the vast dissipation of air pollution caused by strong winds and the Huai River policy) supports a causal interpretation. Mood regulation provides a potential mechanism.",
keywords = "Air pollution, Mutual funds, The disposition effect",
author = "Li, {Jennifer (Jie)} and Massimo Massa and Hong Zhang and Jian ZHANG",
note = "Funding Information: We are especially grateful to an anonymous referee and the editor, William Schwert, for many thoughtful comments and suggestions. We also thank the comments from Li An, Ronald Anderson, Jan Bena, Hui Chen, Tao Chen, Zuo Chen, Henrik Cronqvist, Yongheng Deng, Laurent Fresard, Nandini Gupta, Craig Holden, Jiekun Huang, Jay Jung, Weikai Li, Roger Loh, Christian Lundblad, Robert Marquez, Michaela Pagel, Robert Prilmeier, Wenlan Qian, Jay Ritter, Stephan Siegel, Mathew Spiegel, Laura Starks, Sheridan Titman, Baolian Wang, John Wei, Jeffrey Wurgler, Jin Xie, Bernard Yeung, Jianfeng Yu, Xiaoyan Zhang, Hao Zhou and participants at the 2017 Asian Finance Association Conference, the 2017 China Financial Research Conference, the 2017 SFS Cavalcade Asia Pacific Conference, and the 2017 China International Conference in Finance. Hong Zhang acknowledges support from the Emerging Market Institute of INSEAD, the Phoenix Healthcare Finance Center of PBC School of Finance, and the National Natural Science Foundation of China, grant # 71790591.",
year = "2019",
doi = "10.1016/j.jfineco.2019.09.003",
language = "English",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier",
}