Essays on Behavioural Finance: Effects of Air pollution, ESG factor and DST on stock market

Abstract

This paper consists of three papers; the first paper explores the impact of investor sentiment affected by air pollution on the returns of different industries, the second paper studies the interaction between corporate ESG scores and air pollution, and the third paper explores the short-term and long-term impacts of daylight saving time on the New Zealand stock market and its underlying mechanisms.
The first paper adds to the existing literature on the link between the air quality index as a sentiment indicator and investor decision-making and financial behaviour by focusing on returns in different industries. Based on the existing theoretical literature, this study proposes the research hypothesis to explore the impact of investor sentiment influenced by air pollution on the returns of different industries.
The second paper adds to the existing literature on whether the ESG scoring is priced as a risk factor and performs differently under hazy weather or good air quality weather. This paper explores the impact of the ESG scoring in a panel of S&P 1500 constituents list companies over the period from January 2002 to December 2022 using the fixed-effect panel threshold model. Our results find the existence of threshold effects in the relationship between firms’ ESG scoring and financial performance. Our results indicate that there is a negative interaction between the firms’ ESG scoring and air pollution level on the corresponding firms’ financial performance and the interaction become insignificant under hazy days.
The third paper examines the impact of the daylight saving time (DST) transition on the New Zealand stock market. Applying RDiT design, we find: (a) no evidence of short-term or long-term effects of the DST transition on the New Zealand stock market; (b) the transition from DST to standard time increases the risk of NZX50 index return volatility; and (c) the DST changes increase stock return volatility for New Zealand's largest energy company, whereas no significant effect is observed on the volatility of representative agricultural firms. In addition, we try to identify the potential mechanism of higher market volatility and the downturn of the stock market associated with daylight saving time changes. By further separating the daylight saving time into spring DST and autumn DST, we find that the magnitude and significance of the long-run impact of DST on the stock market are greater due to the autumn DST changes.

Date of Award	24 Jun 2026
Original language	English
Awarding Institution	University of Bath
Supervisor	Jonathan James (Supervisor), Bruce Morley (Supervisor) & Nikolaos Kokonas (Supervisor)