Empirical Research Of How Haze Pollution Negatively Affects Stock Performance In China

Haze pollution exploded in China from 2013 and has swept all over the country ever since,even other countries across strait such as Japan and South Korea was affected sometimes.Till now haze pollution is still one of the hot issues during winters and springs that draw much attention from the the public and government Haze pollution threatens people’s health both in physiology and in psychology,which results in measurable and quantifiable high healthy cost to the society and economy,besides,there are also intangible and concealed cost to the market.As an example,this paper shows that haze pollution negatively affect the performance of stock market in China.The paper compares the connections of stock market fluctuations with air pollution in different time periods before and after the year of 2013 in which haze pollution exploded broadly in China,and the empirical examination result shows that only if the air pollution appears in the form of haze pollution will the extremely bad air quality lead to a negative impact on stock market fluctuations.Other forms of air pollution rather than haze pollution do not significantly affect stock market performance in statistics.The paper rates the air quality in trading days with composite PM 2.5 index as " good days"," bad days"," polluted days",and"non-polluted days".The research does empirical analysis on Shanghai and Shenzhen’s stock market fluctuations in different air quality situations,which shows haze pollution has negative impact on stock market fluctuations and the impact goes larger with the increase of degree of pollution.Through the empirical researches on how haze pollution influences stock performance of various industries,the results show that haze pollution causes indifferently downwards fluctuations on stocks of whether environment-polluting industry,environment-neutral industry,or environment-protective industry,and the negative impact goes larger with the increase of degree of pollution.The results state that investors use consistent passive investment strategy on all industries ’ stocks so that to contribute to the downwards move of the integrate stock market performance,proving that haze pollution negatively affect stock performance through the irrational mechanism,which means that the non-satisfying performance is the projection of investors’passive sentiment that is caused by the haze pollution.With the empirical examination and analysis of how haze pollution impact the performance of stock indexes of different scale,the research finds that haze pollution impacts stock of small scale more in negative direction than it does on stocks of large scale,which is in consistent with the stock scale’s sensitivity with investors’sentiment,giving further proof of the role that investors’sentiment plays in how haze pollution affect the stock market performance in China.Based on all analysis and empirical examinations the research conducts,the paper states that haze pollution has significant negative impact on stock market performance in China,and the impact functions through an irrational mechanism of investors’sentiment resulted from haze pollution.To be concrete,haze pollution leads to the passive sentiment of investors,causing them the feelings of upset,anxiety,and impatience.Passive investors become more risk averse and tend to have negative expectation on investment returns so as to take passive strategy on their investment decision and behavior.In this circumstance,most of the trade in China’s stock market are conducted under the influence of negative sentiment caused by haze pollution,and as a result,the stock market projects investors’bad mood by the downwards fluctuations.