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The Possible Link Between Air Pollution and the Stock Market

8 minutes to read

Learn about a study that links bad air and stock market performance

By now, the dangers of air pollution are well documented, especially as it relates to children and the elderly, who have weaker immune systems, and people who suffer from respiratory problems. But a new study has found a link between air pollution and the stock market, which may indicate that bad air quality is not just a health issue, it may also be an economic hazard.

“Traditionally, we know about the health problems that are associated with bad air quality,” stated Kevin Wood, Camfil USA Vice President Sales & Marketing. “But now we are starting to see that perhaps there is an economic price to pay that is directly related to air quality, and that may help open the eyes of some government officials throughout the world about paying more attention to air pollution.”

The Study

Per an article in the Harvard Business Review titled Air Pollution Brings Down the Stock Market, (1) writer Scott Berinato interviewed Anthony Heyes, a University of Ottawa Economics Professor who conducted the study.

Heyes analyzed information from the S&P 500 index and compared it to the daily air-quality reports provided by an EPA sensor in Wall Street, located in New York.

Heyes and his team found a correlation between high levels of air pollution and low stock performance, which lead them to conclude that bad air quality negatively affects the stock market.

According to Heyes:

“Every time air quality decreased by one standard deviation, we saw a 12% reduction in stock returns. Or to put it in other terms, if you ordered 100 trading days in New York from the cleanest-air day to the dirtiest-air day, the S&P 500 performance would be 15% worse on the 75th cleanest day than it was on the 25th cleanest day. We also replicated this analysis using data from the New York Stock Exchange and Nasdaq, and saw the same effect.”

Heyes believes that higher rates of pollutants in the air affect people’s emotional state, making them more likely to feel depressed.

“[Bad air] negatively affects how you feel and how good you are at thinking,” Heyes stated. “Two, bad moods and lower cognitive capabilities tend to reduce your appetite for risk. Low risk tolerance is associated with lower returns.”

Related Effects of Air Pollution

Heyes’ study that air pollution can affect people’s mood doesn’t exist in a vacuum, however, because a 2015 University of Utah study found a link between suicides and elevated levels of air pollution.

Per an article in Live Science, (2) the study analyzed information on 1,546 suicides in Salt Lake County from 2000 to 2010.

“Researchers then compared the timing of these suicides with air pollution levels, including fine and coarse particulate matter, nitrogen oxide and sulfur dioxide from Environmental Protection Agency (EPA) monitors in the county. They found that suicide risk went up two to three days after levels of fine particulate matter and nitrogen dioxide rose.”

The study also found that the link between suicide and air pollution was most prevalent in men ages 25 to 64, and that suicide rates were highest in the spring and fall.

Amanda Bakian, an epidemiologist at the University of Utah and the author of the study, said:

“What it makes us think is that air pollution interacts with other spring and fall risk factors for suicide.”

And while the researchers stopped short of declaring a direct causation between air pollution and suicides, they do show a correlation that is disturbing and worthy of further study.

Research has also shown that bad air quality may be correlated to a spike in violent crime.

An article on Breitbart (3) cited a National Bureau of Economic Research study conducted by researchers at the University of California, Davis, which found that violent crime in Chicago increased when air pollution levels were higher.

The study analyzed two million crimes reported by the Chicago Police Department from 2001 to 2012, and “noted the direction of the wind as it blew across neighborhoods near five interstate highways…”

Researchers then factored in precipitation, temperature, wind speed and wind direction during that time and found that serious crimes such as rape and homicide increased by 2.2 percent in neighborhoods that were downwind of those interstates that also had higher levels of nitrous oxides.

Doctors have found that nitrous oxide can affect the part of the brain that causes people to act with aggression.

Again, the study only found a correlation, not a direct causation, but it is clear that increased air pollution can have a negative effect on human behavior.

Clean Air Solutions

For more than 50 years, Camfil has provided clean air filtration systems for commercial industries in an effort to help improve indoor air quality. We understand that air pollution has implications beyond just health, and are committed to creating products that offer clean air solutions. Check out our air filters website for more information about our products and services.