Abstract
This paper discusses the asymmetric effect of air quality (AQ) on stock returns (SR) in China's health industry through the quantile-on-quantile (QQ) regression method. Compared to prior literature, our study provides the following contributions. Government intervention, especially industrial policy, is considered a fresh and essential component of analyzing frameworks in addition to investors' physiology and psychology. Next, because of the heterogeneous responses from different industries to AQ, industrial heterogeneity is thus considered in this paper. In addition, the QQ method examines the effect of specific quantiles between variables and does not consider structural break and temporal lag effects. We obtain the following empirical results. First, the coefficients between AQ and SR in the health service and health technology industries change from positive to negative as AQ deteriorates. Second, AQ always positively influences the health business industry, but the values of the coefficients are larger in good air. In addition, different from other industries, the coefficients in the health equipment industry are negative, but the values of the coefficients change with AQ. The conclusions provide important references for investors and other market participants to avoid biased decisions due to poor AQ and pay attention to government industrial policies.
Highlights
Human health, which is one of the essential dimensions of and signs in sustainable development, is the comprehensive embodiment of social, economic, and physical conditions [1, 2]
Given the serious problem of air pollution more happens in undeveloped countries and regions, significant irrational character in their stock markets, and directly relationship with air quality, we are trying to examine the asymmetric effect of AQ on stock returns (SR) in China’s health industry and offer valuable references for investors
We find that the coefficients are positive in the [0, 0.2] and [0.4, 0.8] quantiles and negative in the [0.2, 0.4] and [0.8, 1] quantiles for AQ
Summary
Human health, which is one of the essential dimensions of and signs in sustainable development, is the comprehensive embodiment of social, economic, and physical conditions [1, 2]. In addition to health problems, air pollution results in total welfare losses and has a negative influence on economic activities [8, 9]. Given the serious problem of air pollution more happens in undeveloped countries and regions, significant irrational character in their stock markets, and directly relationship with air quality, we are trying to examine the asymmetric effect of AQ on SR in China’s health industry and offer valuable references for investors. We apply the quantile-on-quantile (QQ) method to explore how air quality influences stock returns across different quantiles This method combines nonparametric estimation and traditional quantile regression, which can recognize the effects between variables in specific quantiles without considering structural break and temporal-lag effects [46, 47]. Section Conclusion and Policy Implications summarizes the conclusion and policy implications
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