Air pollution and household stock market participation

Hongwu Gan; Mengmeng Guo; Jian Li; Geng Niu; Yang Zhou

doi:10.1016/j.jbankfin.2025.107397

Journal of Banking & Finance Vol. 172 2025

Air pollution and household stock market participation

Hongwu Gan¹; Mengmeng Guo^2,3; Jian Li ⁴; Geng Niu^1,5; Yang Zhou⁶

¹ Southwestern University of Finance and Economics · ² Nanjing Agricultural University · ³ Nanjing University of Finance and Economics · ⁴ Dongbei University of Finance and Economics · ⁵ Institute of Economics · ⁶ Wuhan University

Abstract

We investigate whether air pollution affects household stock market participation. Using representative household survey data in China, we find that households significantly reduce their financial risk taking when exposed to heavy air pollution. This finding is robust to an instrumental variable analysis and a regression discontinuity test based on the Huai River policy. To explore the underlying mechanisms, we find that air pollution significantly impairs health, increases unemployment risk, impedes cognitive performance, and dampens mood. We further show that these channels explain a non-trivial proportion of the relationship between air pollution and stock market participation. Our study sheds light on the far-reaching influence of air pollution on households’ well-being from the perspective of portfolio choice.

DOI: 10.1016/j.jbankfin.2025.107397
Volume: 172
Pages: 107397
Language: en
Sources: openalex crossref bibtex:phds-export.bib

Air pollution and household stock market participation

Abstract

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