Study on the influence mechanism of air quality on stock market yield and Volatility: Empirical test from China based on GARCH model

The recent haze weather in China not only influenced people's health, but also had various impacts on stock market. This paper promotes three hypotheses of influence mechanism of air quality on the stock market. National AQI (Air Quality Index) is constructed based on the distribution of shareholders and investor sentiment that is collected from online comments. GARCH model is used for empirical test. The result demonstrates that air quality and investor sentiment can separately or jointly influence stock market, while only investor sentiment can directly influence stock market volatility. Further, Air quality has tremendous impact on investor sentiment.