Sydney is currently blanketed by smoke haze from severe bushfires that have burned through New South Wales.
Air pollution levels on Thursday reached hazardous levels for the second time in a week. The NSW Rural Fire Service has warned that haze could be around for days.
On Thursday, several locations in Sydney had air quality index levels above 1000. Anything over 200 is considered hazardous. Health authorities in Sydney have asked children to stay indoors.
You might be surprised to hear that while air pollution is bad for our health, it can also be bad for the economy.
In our forthcoming study in the Journal of Corporate Finance
we show that air pollution impairs forecasts by financial analysts. This has implications for our financial system, which relies on accurate and timely information.
Air pollution has been rising worldwide. Currently, four in every five city dwellers are exposed to dangerous levels of outdoor pollution. We know that as well as harming physical health, it hurts worker productivity.
We investigated whether it also harms the decision-making ability of financial analysts. This is important because their reports play a crucial role in the functioning of capital markets.