Israeli Study: Smog Bad For Wall Street

wall street tradersTwo Israeli researchers have discovered a link between air pollution and stock returns.

Days with poor air quality may be hurting more than merely your asthmatic nieces and your uncles and aunts with emphysema and your descendants. Now its even hurting your Wall Street stock traders, by affecting their ability to deal with risks.

Two highly respected Israeli scholars, Haifa University Finance Professor Joseph Yagil and Netanya Academic College Finance Professor Tamir Levy are the authors of a new study, noted by Miller-McCune, that found a link between the posted Air Quality Index in New York and Wall Street stock returns.

Basing their investigation on conclusions from a previous study finding that air pollution can trigger depression, anxiety and anger, the two posited that emotional factors like this “may lead to a collective change in the level of risk aversion, resulting in lower stock returns.”

They studied daily stock returns covering ten years from 1997 to 2007 and compared the figures to the Air Quality Index reports for each day, and found that on days that air quality was bad, the stocks were down.

“These findings lend support to the relationship between air pollution and mood established by psychologists, and the relationship between mood and economic consequences established by economists,” they note. “Mood has an impact on decision-making, one type of which is an investment in stocks.”

The stock markets tallied were five leading indices, based on Wall Street in New York City: The S&P 500, the Dow Jones Industrial Average, the NASDAQ Composite Index, the AMEX Composite Index and the Philadelphia Stock Exchange Utility Sector Index.

They used the Air Quality Index for the measurement nearest to Wall Street in New York City; Kings County, Brooklyn.

For Philadelphia air quality, they measured local Philadelphia air quality, but they needn’t have bothered, because they found that on each of New York’s bad air days, depressing Wall Street stock returns, there were negative stock returns in Philadelphia markets as well, so New York air quality ended up having a wider reach. They surmise that this was “probably due to the trading on that exchange conducted by New York traders.”

You might think that this would be something that you could make a killing off, because poor air quality will likely increase now in America, the opposite of the direction the rest of the world is taking.

Following last year’s bought and paid for  Supreme Court “ruling” legalizing corporate bribery, polluters now run America and are reversing decades of progress on air pollution. With funding from oil billionaires, neighboring New Hampshire just walked out of the Regional Greenhouse Gas Initiative. In order to cut pollution, it had participated in this cap and trade market with ten Northeast states, including New York.

A new billionaire-funded GOP at the US federal level is also bent on de-funding environmental protections; eliminating 30% of the budget for the EPA, so that polluters may once again run free. Many coal plants are concentrated in the Northeast and gas fracking is now a serious pollution issue in New York.

So, you’d think that you could bet on this plutocracy rolling us back to the lax standards of developing nations, that there will be more days that you could take advantage of the resulting misery, anger, anxiety and depression of stock market traders.

But there’s a catch. Computers increasingly control trading.They are unaffected by local air quality. At least until it gets really, really bad.

More on air quality:
Israeli Clean Air Act Goes into Effect
Why 27 People A Day Die From Air Pollution in Tehran
A Black Smog-Craft Chokes Cairo’s Skies

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