A Study On The Impact Of Air Quality On Stock Investment Returns

The process of economic liberalization of China has been accelerating,and the perfection of the stock market has gradually improved.But at the same time of rapid economic development,some unbalanced contradictions begin to appear,air pollution is one of them.As one of the largest coal consumers in the world,China consumes a lot of non renewable energy.This rough development mode makes the air bearing capacity of pollutants reach saturation,and smog occurs frequently.Serious air pollution will not only cause serious harm to people's health,but also have a huge negative impact on the economy.Relevant scholars have found that the stock market is often affected by"anomalies",such as cloud coverage,extreme weather and other factors.Therefore,under the background of serious air pollution,this paper focuses on air quality,and makes a more in-depth exploration of the relationship between it and stock return.After sorting out the relevant literature at home and abroad,it is found that the impact of air quality on stock investment returns has been mainly focused on the whole stock market,which is contrary to the limited attention hypothesis and deviates from the investment facts.Therefore,based on the theory of limited attention of investors,this paper focuses on the difference of the impact of air quality on high air pollution industry and low air pollution industry,and tries to study the heterogeneity of stock investment returns in different geographical locations under the same pollution degree.The research methods applied are mainly literature induction,multiple linear regression,Copula function and multiple logit model Type method.The empirical results show that:(1)When air quality is poor,investors mainly focus on air pollution industry stocks.According to the theory of limited attention,investors can't spread their attention equally on all stocks in the stock market.They usually only focus on stocks closely related to the information they get.Therefore,when the air pollution is serious,the stocks of high air pollution industry will attract the investors' attention.Our empirical analysis also fully proves this point.(2)Air quality has a negative impact on the stock market.The empirical study shows that whether it is the overall stock index,high air pollution industry or low air pollution industry stock index,the impact of air quality on them is negative,which shows that the bad mood caused by poor air quality is widespread;but the impact of air quality on non pollution industry stock index is not significant,which shows that the impact does not cover the whole stock market.(3)Air quality has a stronger impact on the return on equity investment in high air pollution industries.Under the constraint of limited attention,investors' limited attention leads to the greater impact of air quality on the return on investment of high air pollution industry stocks.The empirical study also shows that the return on equity investment in high air pollution industry is most affected by air quality,and only the return on equity investment in high air pollution industry is statistically significant.(4)The impact of air quality on the return of stock investment in high air pollution industry is different in geographical areas.Under the restriction of investors' limited attention,the difference of air pollution degree between the north and the South leads to investors' overreaction to the air pollution industry stock in the north.The empirical results show that the investment income of air pollution industry stock in the north is more affected by air quality than that in the south.Finally,based on the conclusions of this paper,it provides a feasible decision reference for enterprise location and government investment.This paper's main innovations are as follows:(1)Most of the existing studies take the overall investment return of the stock market as the index variable,which implies that the change of the investment strategy adopted after the investor sentiment is affected by the air quality will have a significant impact on the investment return of all industries in the market,which is not only inconsistent with the theory of limited attention of investors,deviates from the actual investment behavior,but also obviously inconsistent with the reality.Therefore,based on the theory of limited attention of investors,this paper focuses on the impact of poor air quality on polluting industries,and compares it with non polluting industries to highlight the industry differences in the process of air quality affecting stock investment returns.(2)The existing research focuses on the heterogeneity of the impact of air pollution on the return on investment in China's stock market from the time dimension,ignoring the discussion of spatial heterogeneity under the same pollution degree.Therefore,based on the analysis of industry differences,this paper further divides the polluting industry into two parts:the polluting enterprises in the South and the polluting enterprises in the north according to the geographical location,and explores whether air quality will have different impacts on the stocks in different geographical locations in the north and the south.Taking regional factors into account is also the main innovation of this paper.