Can Dirty Air in NYC Crash the Stock Market — and Your Portfolio?

Photo by Marco Rubino /

An uptick in air pollution levels in Manhattan isn’t just bad news for people breathing in the polluted air — it can also wreak havoc on the stock market.

According to researchers from the University of Ottawa and Columbia University, a one-standard-deviation increase in air pollution in Manhattan — where the New York Stock Exchange is based — reduces returns by a whopping 11.9 percent.

“The effects are substantial,” the researchers write in their study, which as recently published in the National Bureau of Economic Research.

The findings are based on the comparisons of 15 years of returns with the S&P 500 index and hourly measurements of fine particulate matter in lower Manhattan.

The researchers theorize that bad air has a direct impact on investors:

We hypothesize that pollution decreases the risk attitudes of investors via short-term changes in brain and/or physical health.

The new study produced similar findings to another recent study, which analyzed the relationship between mood effects and stock market returns in Turkey. According to that study:

We find that lag of air pollution in the three most populated cities of Turkey where the majority of investors live is negatively related to stock returns, even when other variables are controlled.

Knowing that stocks can take a hit when air pollution levels rise, “it might be time for investors to keep tabs on the Air Quality Index in addition to the other usual stock market indicators,” says MoneyWatch.

Are you surprised there was a connection found between stock returns and air pollution levels? Share your comments below or on our Facebook page.

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