Abstract
This dissertation contains three essays in financial economics. The first essay shows that natural capital loss affects financial markets and municipalities' borrowing costs. Using exogenous variation in wetlands change, I find that a loss in wetland area is related to an increase in municipal bond yields in both primary and secondary markets. Municipal bond markets price nature loss risk following an extreme precipitation event. The results show one of the costs of natural capital destruction on financial markets and local government's finances.
The second essay investigates the impact of pollution on entrepreneurial activity. I use the recurring cicada emergence cycles in the U.S. as exogenous shocks to show that pollution caused by pesticide use decreases entrepreneurial activity and quality by 3%. I find that pesticide use is linked to the households' decision to start a business through the impact of pollutants on health. I also find evidence for the "job-lock" effect of employer-based insurance coverage on entrepreneurial activity.
The third essay examines whether mortality patterns have a predictable impact on aggregate mutual fund flows and asset prices. We examine whether mortality-induced demographic shifts affect mutual fund flows and stock returns. We find that fund flows are more positive during high mortality months, and this mortality-flow relation is stronger among funds that older investors prefer. Using newspaper obituaries to measure mortality, we find that high mortality exposure stocks earn abnormal returns following abnormal mortality months.