[rbavocadotree]

From the original source:

> Stock market returns are lower on polluted days.

I don't want to dismiss the entire article, but I think this points to possibility that there is some bad statistics going on here. I don't see how daily stock returns are proof of, or even related to, cognitive ability on a daily basis.

This is exactly the type of finding you'd expect with p-hacking.

[andy_ppp]

Maybe people are more negative because of traffic, noise and frustrated about getting to work later. I find it hard to imagine a way to control for this short of making people breathe these substances separately and seeing if they actually do have lower IQs. You can then control for the other factors. These all seem to be epidemiological studies that we can't show the pollution is for sure the root cause. It could, for example, be that pollution is 25% of the result for example with more noise, traffic, irritation etc. being the other 75%.

[lazyjones]

This is probably just a coincidence. Stock markets perform lower on Mondays: https://www.macroption.com/stock-market-performance-volatili...

Traffic is probably generally higher on Mondays, though I have only anecdotal evidence.

[cowsandmilk]

The journal article explicitly calls out day of week and controls for it...

[ajross]

Heh, a rare example of the "proof of correlation isn't proof of the absence of causation" fallacy. No reason that stock markets couldn't perform worse on Mondays because of the extra traffic pollution.

[jjeaff]

But it's not like companies provide daily sales performance data to trade on. Markets move on speculation. They aren't actually pegged to company performance.

How would lower cognitive ability make markets move lower on a daily basis? All I can think is higher pollution creating greater pessimism among traders.

[ajross]

Markets aren't perfectly efficient. Some trades are dumb. People with lower cognitive ability are more likely to place an order and forget to check fundamentals first, forget to check competitor data, or quiet frankly make whopper mistakes like confusing a ticker symbol. Think of the loons you see on /r/wallstreetbets and other spots. They live on a spectrum, and all of us have bad days.

People with impaired cognitive ability are more likely to make dumb mistakes. That seems pretty obvious to me. The only question is whether or not the effect is large enough to measure using a coarse statistic like this, but that's a quantitative argument.

[jjeaff]

Yes, but for most dumb trades, there is someone on the other end making a deal. So the 'dumb' trades would have to lean more towards selling rather than buying.

Perhaps pollution just makes one more pessimistic and therefore bearish.

[mc3]

??? Who ever said correlation => not causation.

[throwaway2048]

Pretty much every internet comment section for the last 2 decades.

[mc3]

I don't think so. `Correlation => Causation` is used all the time - this is the bread and butter of clickbait headlines and articles "new study shows that...", but `Correlation => ^Causation` requires some sophistication to state ... while being wrong at the same time. Maybe a tactic used to mislead? I haven't seen it ever used.

To be clear `Correlation => ^Causation` is different to `Correlation => TRUE`. (In other words, there is nothing you can deduce from correlation alone).

[cowsandmilk]

Read the linked journal article; the authors don’t actually claim it is about cognitive ability, they attribute it to lower risk taking on those days.

[rbavocadotree]

As someone who works for a quantitative hedge fund, you wouldn't believe how many similar results I see of researchers showing a statistically significant predictor of stock market returns. Almost every single one of them is garbage.

But your point stands. The paper has nothing to do with cognitive ability. So why is it being used as evidence?

[avip]

Is it even possible for a statistically significant predictor of stock market to be both known to the public and not garbage?

[OnlineGladiator]

> As someone who works for a quantitative hedge fund, you wouldn't believe how many similar results I see of researchers showing a statistically significant predictor of stock market returns. Almost every single one of them is garbage.

Are you able to share any that aren't (or weren't) garbage?

[rbavocadotree]

Here's a disappointingly simple and well known one: Momentum. It produces real, statistically significantly, excess risk-adjusted returns over an index.

The remarkable thing is that it has been well known for decades, and continues to work. Many fortunes have been made by systematically exploiting it.

[jefftk]

Ones that aren't garbage are valuable! Until the rest of the market adjusts, and then they're garbage.

[jjeaff]

Exactly, there is no actionable publicly known indicator. Because the moment it becomes known by a large enough group of traders, it becomes useless.

[OnlineGladiator]

He could share past insights that are no longer relevant. I obviously don't expect him to give away a stock tip worth millions of dollars.

[ajross]

It's a review article. The paper you mention was just one of many cited. And sure, those are all different papers written by different authors and it's surely not unlikely that there are errors in there. But the reason for reviews like this one is to point out that all these different results support the same basic hypothesis.

As far as stocks, specificaly: really? People with cognitive trouble make bad stock picks all the time. Most of us have grandparents who have exhibited exactly this kind of mistake. While it's surely true that the bulk of analyst-driven trades are checked by methods that aren't sensitive to pollution (or just by analysts in different climates), there are certainly enough single-decider trades going on to show a small effect like this if it exists.

I mean, no, one oddball stock market paper doesn't prove much of anything. But in combination with a bunch of other research like this, it's worth taking seriously.

[sgustard]

To clarify, the paper studied "air quality in the vicinity of Wall Street".

[alexandercrohde]

"I don't want to dismiss the entire article"

Good. Because you can't cherry-pick one dubious-seeming journal article and use it as a justification to ignore several completely unaffiliated articles.