Daily Bulletin


News

  • 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.

Smoke haze hurts financial markets as well as the environment 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

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

Writers Wanted

Planning a road trip in a pandemic? 11 tips for before you leave, on the road and when you arrive

arrow_forward

Biden's cabinet picks are globally respected, but one obstacle remains for the US to 'lead the world' again

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Ben Fordham, 2GB

BEN FORDHAM: Scott Morrison, good morning to you.    PRIME MINISTER: Good morning, Ben. How are you?    FORDHAM: Good. How many days have you got to go?   PRIME MINISTER: I've got another we...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Business News

Nisbets’ Collab with The Lobby is Showing the Sexy Side of Hospitality Supply

Hospitality supply services might not immediately make you think ‘sexy’. But when a barkeep in a moodily lit bar holds up the perfectly formed juniper gin balloon or catches the light in the edg...

The Atticism - avatar The Atticism

Buy Instagram Followers And Likes Now

Do you like to buy followers on Instagram? Just give a simple Google search on the internet, and there will be an abounding of seeking outcomes full of businesses offering such services. But, th...

News Co - avatar News Co

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion