Title:Does Haze Cloud Financial Decision Making? A Natural Laboratory Experiment
Presenter:Prof.CHEW Soo Hong
Hosted by:Prof.Ying Fan
Time:2018.5.31 16:00-18:00
Location:A618
Abstract:
The adverse impact of haze on health and its association with a range of economic outcomes has received increasing attention in the literature. A natural laboratory experiment involving more than 600 subjects enables a first attempt at investigating the causal effect of haze proxied by particulate matter of diameter up to 2.5 microns on decision making. This study was conducted in Beijing over five days with highly varying levels of PM2.5 in October 2012, before this measure became commonly known in China from the beginning of 2013. We observe several effects of an increase in PM2.5. In individual decision making, we find an increase in aversion to risk over gains and in tolerance to risk over losses. This gives rise to an increase in loss-gain differentiation in risk attitude, underpinning a corresponding increase in the disposition effect. This is confirmed in Li, et al. (2017) using trading information from 773,198 accounts covering more than 200 Chinese cities. In other-regarding behavior, subjects become less prosocial: giving less in a dictator game, contributing less in a public goods game, reciprocating less in a sequential prisoners’ dilemma, and demanding more as responder in an ultimatum game. In strategic behavior, there is a decline in iterative thinking in a p-beauty game. Taken together, our results provide a preferential foundation to several papers linking short term variations in air quality to real-world economic variables such as worker productivity, movie attendance and revenue, and criminal activities, besides the performance of stock markets.
