Uncommon knowledge

The stock market hates dirty air

Surprising insights from the social sciences

By Kevin Lewis
February 20, 2011

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One of the main arguments against regulating air pollution is that the regulations hurt business. But, in an ironic twist, a new study suggests that the pollution itself hurts business where it arguably counts most: the stock market. Analyzing daily index returns from several stock exchanges over a 10-year period, the authors of the study found that stock returns were generally lower on days with poor air quality ratings in the vicinity of the stock exchange. The effect is significant: Trading stocks based on day-to-day air quality ratings might have allowed you to beat the annual return on the S&P 500 by several percentage points.

Levy, T. and Yagil, J., “Air Pollution and Stock Returns in the US,” Journal of Economic Psychology (forthcoming).

The myth of the small-town pol If your only view of reality came from political rhetoric, you couldn’t be blamed for thinking that most politicians come from small towns, a.k.a. the heartland. Guess again. According to a new analysis of gubernatorial and US Senate candidates from 1996 to 2006, most candidates were denizens of the most populated areas, in greater proportion than even that area’s share of the population. Republican nominees to the US Senate were even less likely than their Democratic counterparts to come from small towns. Meanwhile, state capitals were much more likely to produce candidates, especially for Democrats. This pattern raises the question of whether rural areas are fairly represented in our political system.

Gimpel, J. et al., “The Wellsprings of Candidate Emergence: Geographic Origins of Statewide Candidacies in the United States,” Political Geography (January 2011).

Does baseball scouting work? A key tenet of modern management is to recognize and promote talent early on. To do so, managers need metrics that reliably predict future performance. Given that sports like baseball are rife with metrics, it stands to reason that team managers must have already figured out the science of early recruiting. Yet, a new study of baseball pitchers by researchers at the University of Massachusetts Amherst finds that minor-league performance is actually not very predictive of major-league performance. Although performance at the higher levels of minor-league baseball is somewhat better at predicting major-league performance, it’s still a lot less predictive than major-league play itself. This suggests that organizations need to be even more careful with their human resources strategy. An average entry-level performer may become a star later on.

Longley, N. & Wong, G., “The Speed of Human Capital Formation in the Baseball Industry: The Information Value of Minor-League Performance in Predicting Major-League Performance,” Managerial and Decision Economics (forthcoming).

Bzzzt! You’re smarter When told to put your thinking cap on, wouldn’t it be nice if you could actually do that? Well, new research seems to deliver. People were asked to solve problems requiring analytical insight while a pair of saline-soaked sponge electrodes were placed on opposite sides of the scalp. A weak direct current flowed in one direction for some people, in the opposite direction for other people, and, as a control, no current was used for a third set of people. In one direction, the authors report, the electrical field produced a remarkable effect: “a three-fold increase in the likelihood of solving the problems. This is the strongest cognitive enhancement we are aware of for a brain stimulation study.” According to the authors, when the electrical field is applied with a certain polarity, it inhibits top-down thinking from the left hemisphere and stimulates bottom-up thinking from the right hemisphere.

Chi, R. and Snyder, A., “Facilitate Insight by Non-Invasive Brain Stimulation,” PLoS ONE (February 2011).

The leer effect It’s tempting to assume that the objectification of women is only a problem in the media, or that it doesn’t have much of an effect, or that women ignore it. Not so, according to a new study. Men and women were paired with someone of the opposite sex — who was actually working for the researchers — to compete as a team on a math test for money. The experiment was rigged so that some of the subjects were given several objectifying gazes — looking at the subject’s chest — and given feedback that made brief mention of their looks. Women, but not men, who were objectified in this way performed worse on the math test. However, these same women — but, again, not the men — were subsequently more interested in spending time with the other person.

Gervais, S. et al., “When What You See Is What You Get: The Consequences of the Objectifying Gaze for Women and Men,” Psychology of Women Quarterly (forthcoming).

Kevin Lewis is an Ideas columnist. He can be reached at