When the Air Turns Grey: Assessing the Impact of Air Pollution on a Frontier Stock Market

This article investigates the impact of air pollution on the Argentine stock market, a frontier market. Using data from the period 2011–2024, the findings indicate that higher levels of pollution are linked to lower stock returns, reduced volatility, and diminished market liquidity. These effects are more pronounced during periods of declining prices, supporting the existence of a mood congruency effect and/or asymmetries in investors’ risk aversion. Our results are robust to a wide range of control variables and hold important implications for academics, investors, and regulators seeking to understand the broader economic consequences of environmental factors on financial market performance.