We examine whether fund managers overestimate carbon risk when they are exposed to local air pollution. We find that air pollution causes managers to underweight stocks of high-emission firms. The effects are stronger for less salient scopes of carbon emissions, among managers located in...

Air pollution is one of the most serious environmental risks and imposes multi-dimensional externalities. This paper examines the impact of air pollution on the efficiency of financial markets. Using a comprehensive set of market anomalies and a composite mispricing score constructed based on...

We study exposure to pollution information and investment portfolio allocations, exploiting the rollout of air quality monitoring stations in India. Using a triple-differences framework, we show that retail investors' investments in "brown" stocks are negatively related to local air pollution...