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Article

The Effect of Air Quality and Weather on the Chinese Stock: Evidence from Shenzhen Stock Exchange

1
Division of Chinese Foreign Affairs and Commerce, Hankuk University of Foreign Studies, Seoul 02450, Korea
2
Department of Economics, University of Pretoria, Pretoria 0002, South Africa
3
Indian Institute of Management Lucknow, Prabandh Nagar off Sitapur Road, Lucknow 226013, Uttar Pradesh, India
4
Department of Economics, Pusan National University, Busan 46241, Korea
*
Author to whom correspondence should be addressed.
Academic Editor: Hans Lööf
Sustainability 2021, 13(5), 2931; https://doi.org/10.3390/su13052931
Received: 12 December 2020 / Revised: 3 March 2021 / Accepted: 4 March 2021 / Published: 8 March 2021
(This article belongs to the Special Issue Green Finance, ESG and Financial Risk Management)
We investigated the impact of air quality and weather on the equity returns of the Shenzhen Exchange. To capture the air quality and weather effects, we used dummy variables created by employing a moving average and moving standard deviation. The important results are as follows. First, in the whole sample period (2005–2019), we find that high air pollution and extremely high temperature have significant and negative influence on the equity returns. In the sub-period I (2005–2012), the 11-day model and 31-day model show that high air pollution have significant and negative impacts on the Shenzhen stock returns. Second, the results of the quantile regression show that high air pollution have significant and negative effects during bullish market phase, and extremely high temperature have significant and negative effects during bearish market phase. This implies that the air quality and weather effects are asymmetric. Third, the weather effect of the abnormal temperature on the stock returns is greater in severe bearish market. Whereas the effect of the air pollution on the stock returns is greater in the bullish market. Fourth, the least squares method underestimates the air quality and weather effects compared to the quantile regression method, suggesting that the quantile regression method is more suitable in analyzing these effects in a very volatile emerging market such as the Shenzhen stock market. View Full-Text
Keywords: air quality; extreme weather; MA-MSD method; investor sentiment; behavioral finance air quality; extreme weather; MA-MSD method; investor sentiment; behavioral finance
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MDPI and ACS Style

Jiang, Z.; Gupta, R.; Subramaniam, S.; Yoon, S.-M. The Effect of Air Quality and Weather on the Chinese Stock: Evidence from Shenzhen Stock Exchange. Sustainability 2021, 13, 2931. https://doi.org/10.3390/su13052931

AMA Style

Jiang Z, Gupta R, Subramaniam S, Yoon S-M. The Effect of Air Quality and Weather on the Chinese Stock: Evidence from Shenzhen Stock Exchange. Sustainability. 2021; 13(5):2931. https://doi.org/10.3390/su13052931

Chicago/Turabian Style

Jiang, Zhuhua, Rangan Gupta, Sowmya Subramaniam, and Seong-Min Yoon. 2021. "The Effect of Air Quality and Weather on the Chinese Stock: Evidence from Shenzhen Stock Exchange" Sustainability 13, no. 5: 2931. https://doi.org/10.3390/su13052931

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