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Study on the influence mechanism of air quality on stock market yield and Volatility: Empirical test from China based on GARCH model

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  • An, Na
  • Wang, Baixue
  • Pan, Peilin
  • Guo, Kun
  • Sun, Yi

Abstract

The recent haze weather in China not only influenced people's health, but also had various impacts on stock market. This paper promotes three hypotheses of influence mechanism of air quality on the stock market. National AQI (Air Quality Index) is constructed based on the distribution of shareholders and investor sentiment that is collected from online comments. GARCH model is used for empirical test. The result demonstrates that air quality and investor sentiment can separately or jointly influence stock market, while only investor sentiment can directly influence stock market volatility. Further, Air quality has tremendous impact on investor sentiment.

Suggested Citation

  • An, Na & Wang, Baixue & Pan, Peilin & Guo, Kun & Sun, Yi, 2018. "Study on the influence mechanism of air quality on stock market yield and Volatility: Empirical test from China based on GARCH model," Finance Research Letters, Elsevier, vol. 26(C), pages 119-125.
    • Handle: RePEc:eee:finlet:v:26:y:2018:i:c:p:119-125
    DOI: 10.1016/j.frl.2017.12.002
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    Cited by:

    1. Matthew Muntifering, 2021. "Air pollution, investor sentiment and excessive returns," Journal of Asset Management, Palgrave Macmillan, vol. 22(2), pages 110-119, March.
    2. Yu, Jize & Zhang, Li & Peng, Lijuan & Wu, Rui, 2023. "Which component of air quality index drives stock price volatility in China: a decomposition-based forecasting method," Finance Research Letters, Elsevier, vol. 51(C).
    3. Guo, Liwen & Cheng, Zhiming & Tani, Massimiliano & Cook, Sarah, 2024. "Air pollution and education investment," Energy Economics, Elsevier, vol. 132(C).
    4. Zhang, Yihao & Tao, Lingfeng, 2019. "Haze, investor attention and China's stock markets: Evidence from internet stock forum," Finance Research Letters, Elsevier, vol. 31(C).
    5. Zhao, Guangchuan & Cao, Xinbang & Ma, Chao, 2020. "Accounting for horizontal inequity in the delivery of health care: A framework for measurement and decomposition," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 13-24.
    6. Chen, Zhonglu & Zhang, Li & Weng, Chen, 2023. "Does climate policy uncertainty affect Chinese stock market volatility?," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 369-381.
    7. Hu, Xiaolu & Zhong, Angel & Cao, Youdan, 2022. "Greenium in the Chinese corporate bond market," Emerging Markets Review, Elsevier, vol. 53(C).

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