.

  • Written by Naomi Soderstrom, Professor of Accounting and Deputy Head of Department, University of Melbourne

Sydney is currently blanketed by smoke haze from severe bushfires that have burned through New South Wales.

Air pollution levels on Thursday reached hazardous levels for the second time in a week. The NSW Rural Fire Service has warned that haze could be around for days.

On Thursday, several locations in Sydney had air quality index levels above 1,000. Anything over 200 is considered hazardous. Health authorities in Sydney have asked children to stay indoors.

You might be surprised to hear that while air pollution is bad for our health, it can also be bad for the economy.

In our forthcoming study in the Journal of Corporate Finance we show that air pollution impairs forecasts by financial analysts. This has implications for our financial system, which relies on accurate and timely information.


Read more: How does poor air quality from bushfire smoke affect our health?


Air pollution has been rising worldwide. Currently, four in every five city dwellers are exposed to dangerous levels of outdoor pollution. We know that as well as harming physical health, it hurts worker productivity.

We investigated whether it also harms the decision-making ability of financial analysts. This is important because their reports play a crucial role in the functioning of capital markets.

Beijing smoke haze, November 2018. ROMAN PILIPEY/EPA

China is an ideal place to study it.

Over the past 20 years China has faced severe air pollution, including the infamous “airpocalypse” which struck Bejing in 2013, when average air quality levels remained hazardous for much of the year.

Recently China has made headway in reducing air pollution, but it remains a significant issue.

China is not alone – emerging and developing nations such as Brazil, India and Iran face similar problems – so our study is useful for understanding the economic effects of pollution elsewhere.

We examined the pollution levels in different cities on the days Chinese companies announced their earnings.

The more hazy the location, the more hazy the thinking

Most Chinese companies are followed by analysts in a number of Chinese cities. On earnings days, some are experiencing haze and others are not.

We were able to examine more than 59,000 publicly available forecasts from more than 2,000 analysts. We used published phone numbers to identify their locations.

We found those that were exposed to haze produced less bold forecasts, less timely forecasts, and less accurate forecasts

Analysts exposed to pollution were

  • 4.8% less likely to differentiate their forecasts from those of other analysts

  • 4% less likely to incorporate the new information from the announcements into their forecasts

  • 14% less likely to revise their forecasts at all within two days the announcements.

Hazy thinking matters

We are not sure why. We know that air pollution has negative effects on physical health and mood and we know that financial analysts are exposed to pollution not only when outside, but also at home and in the office, since filtering systems cannot completely clean the air.

Investors rely on analysts to provide information. Earnings announcements are key information events. Poor forecasts resulting from those events are an indirect negative effect of high levels of pollution.

Those indirect negative effects might be widespread, extending as far as manufacturing, schools and services industries. They add to the case for cleaning up air.


Read more: How rising temperatures affect our health


The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Authors: Naomi Soderstrom, Professor of Accounting and Deputy Head of Department, University of Melbourne

Read more http://theconversation.com/smoke-haze-hurts-financial-markets-as-well-as-the-environment-127511

Friday essay: living with fire and facing our fears

The smouldering ruins of a child's bike lies amongst a property lost to bushfires in the Mid North Coast region of NSW last month. Darren Pateman/AAPIt is only mid-November but we have to walk early t...

Danielle Clode, Senior Research Fellow in Creative Writing, Flinders University - avatar Danielle Clode, Senior Research Fellow in Creative Writing, Flinders University

Explainer: why homicide rates in Australia are declining

Latest figures reveal homocides in Australia are at historic lows. AAP/James RossAccording to the latest figures, homicides in Australia are at historic lows and compare well against international tr...

Terry Goldsworthy, Associate Professor in Criminology, Bond University - avatar Terry Goldsworthy, Associate Professor in Criminology, Bond University

Making space: how designing hospitals for Indigenous people might benefit everyone

Sunshine Coast University Hospital uses evidence-based design to provide outside spaces with views that Indigenous people tell us they value. Architectus, Author providedWelcome to the next article in...

Timothy O'Rourke, Senior Lecturer, School of Architecture, The University of Queensland - avatar Timothy O'Rourke, Senior Lecturer, School of Architecture, The University of Queensland

Vital Signs: Australia's slipping student scores will lead to greater income inequality

While no test is perfect but the Programme for International Student Assessment rankings are pretty useful for understanding the skills young people are being equipped with. www.shutterstock.comThe la...

Richard Holden, Professor of Economics, UNSW - avatar Richard Holden, Professor of Economics, UNSW

We're using lasers and toaster-sized satellites to beam information faster through space

The electromagnetic spectrum we can access with current technologies is completely occupied. This means experts have to think of creative ways to meet our rocketing demands for data. NASA Johnson/Flic...

Gottfried Lechner, Associate Professor and Director of the Institute for Telecommunications Research, University of South Australia, University of South Australia - avatar Gottfried Lechner, Associate Professor and Director of the Institute for Telecommunications Research, University of South Australia, University of South Australia

Grattan on Friday: Angus Taylor's troubles go international, in brawl with Naomi Wolf

Morrison would rather live with a problem minister in a key post than give a scalp to Labor. Mick Tsikas/AAPScott Morrison said it with a straight face, and repetition for emphasis. “I’m v...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Early medical abortion is legal across Australia but rural women often don't have access to it

Australian women can have an early medical termination – which involves taking two oral medications – up to the ninth week of pregnancy. Jonatán Becerra/UnsplashAround one in s...

Jane Tomnay, Assoc. Professor / Director of Centre for Excellence in Rural Sexual Health, University of Melbourne - avatar Jane Tomnay, Assoc. Professor / Director of Centre for Excellence in Rural Sexual Health, University of Melbourne

All hail apostrophes - the heavy lifters who 'point a sentence in the right direction'

Doing away with the apostrophe is not just the beginning of the end ... it's the end. www.shutterstock.comReports this week about the demise of the Apostrophe Protection Society may have been greatly...

Roslyn Petelin, Course coordinator, The University of Queensland - avatar Roslyn Petelin, Course coordinator, The University of Queensland

It's the 10-year anniversary of our climate policy abyss. But don't blame the Greens

In 2009, a Bob Brown-led Greens party voted against an emissions trading scheme – but they can't be blamed for what came after. Mick Tsikas/AAPFederal Labor this week commemorated a dubious anni...

Rebecca Pearse, Lecturer, Department of Political Economy, University of Sydney - avatar Rebecca Pearse, Lecturer, Department of Political Economy, University of Sydney

Morrison cuts a swathe through the public service, with five departmental heads gone

Scott Morrison has announced a dramatic overhaul of the federal public service, cutting the number of departments and creating several new mega ones, while removing five secretaries. The departments...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Tick, tock... how stress speeds up your chromosomes' ageing clock

At a molecular level, stresses and strains can make your body clock break into a sprint. Lightspring/ShutterstockAgeing is an inevitability for all living organisms, and although we still don’t ...

Szymek Drobniak, DECRA Fellow, UNSW - avatar Szymek Drobniak, DECRA Fellow, UNSW

The government wants to privatise visa processing. Who will be held accountable when something goes wrong?

The Department of Home Affairs has begun taking steps to outsource its visa processing to private service providers. This move has sparked an important national debate on transparency, accountability ...

Marina Khan, PhD Candidate, Western Sydney University - avatar Marina Khan, PhD Candidate, Western Sydney University

Left-leaning Australians may look to New Zealand with envy, but Ardern still has much work to do

Jacinda Ardern created an indefinable aura of promise – but just as people fall in love, some have fallen out of love, too. AAP/Mick TsikasIn October 2017, 37-year-old Jacinda Ardern became prim...

Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey University - avatar Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey University

Scientists fear insect populations are shrinking. Here are six ways to help

Scientists need your help to protect Australia's insects and track their numbers. Joe Castro/AAPAre you planning a big garden clean-up this summer, or stocking up on fly spray to keep bugs at bay? Bef...

David Yeates, Director of the Australian National Insect Collection, CSIRO - avatar David Yeates, Director of the Australian National Insect Collection, CSIRO

Aquariums, meerkats and gaming screens: how hospital design supports children, young people and their families

This aquarium at the Royal Children's Hospital in Melbourne helps reframe hospitals as exciting hubs of activity with things to do and friends to meet. Shannon McGrath/Advanced Aquarium TechnologiessW...

Stephanie Kathleen Liddicoat, Lecturer, Architectural Design, Swinburne University of Technology - avatar Stephanie Kathleen Liddicoat, Lecturer, Architectural Design, Swinburne University of Technology

To stop a tech apocalypse we need ethics and the arts

If recent television shows are anything to go by, we’re a little concerned about the consequences of technological development. Dystopian narratives abound. Black Mirror projects the negative ...

Sara James, Senior Lecturer, Sociology, La Trobe University - avatar Sara James, Senior Lecturer, Sociology, La Trobe University

To restore public confidence in apartments, rewrite Australia's building codes

Compliance with the National Construction Code provides no guarantee that an apartment won't leak. ShutterstockA prestige apartment building in Sydney built by a well-known developer is undergoing a ...

Geoff Hanmer, Adjunct Lecturer in Architecture, UNSW - avatar Geoff Hanmer, Adjunct Lecturer in Architecture, UNSW

Explainer: the ideas of Kant

The moody landscapes of Caspar David Friedrich were inspired by Kant's ideas of the sublime. Wikimedia CommonsIt was claimed Immanuel Kant’s routine was so predictable his neighbours could set t...

Cat Moir, Senior Lecturer in Germanic Studies, University of Sydney - avatar Cat Moir, Senior Lecturer in Germanic Studies, University of Sydney

GDP update: spending dips and saving soars as we stash rather than spend our tax cuts

Australians saved rather than spent most of the budget tax cuts, almost doubling the proportion of household income saved, leaving spending languishing. The September quarter national accounts show t...

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University - avatar Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Sick and Tired of Your Dead End Job? Try Teaching!

Tired of the same old grind at the office? Want an opportunity to impact lives both in your community and around the world? Do you love to travel and have new experiences? Teaching English is the perfect job for you! All you need is a willingness to ...

News Company - avatar News Company

The Impact of an Aging Population in Australia

There’s an issue on the horizon that Australia needs to prepare for. The portion of elderly citizens that make up the country’s overall population is increasing, and we might not have the infrastructure in place to support this. Australians h...

News Company - avatar News Company

LifeStyle

Ways Love and Relationships Benefit Body and Mind

Being in a happy relationship is great. You always have someone to greet you when you come home ...

The Importance of Smiling: How You Can Smile More

Happiness is something we all strive for and is often just out of reach. Of course, it’s impos...

5 Things to Do On Your Wedding Morning

After months of meticulous planning, wedding mornings usually find the bride excited but stressed ...

How to Make Your Girlfriend’s Birthday Extra Special

Your girlfriend’s birthday is your opportunity to show her how much you care. But how exactly do...