Geopolitical Risk on Stock Returns: Evidence from Inter-Korea Geopolitics

Jung, Seungho; Lee, Jongmin; Lee, Seohyun

doi:10.5089/9781557759672.001

Cited by 10 publications

(4 citation statements)

References 20 publications

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“…It is worth noting that the spillover table utilized in this analysis adheres to the standard Diebold and Yilmaz methodology without the inclusion of frequency bands. This finding aligns with prior research that has demonstrated the influence of geopolitical risks on financial markets [74,75]. In a similar vein, [76] revealed that the conflict under scrutiny has had a substantial impact on global financial markets, manifesting as heightened volatility and increased risk aversion across various asset classes.…”

Section: Time-varying Diebold-yilmaz Connectednesssupporting

confidence: 87%

Spillovers across the Asian OPEC+ Financial Market

Vuković,

Dekpo-Adza,

Khmelnitskiy

et al. 2023

Mathematics

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This research utilizes the Diebold and Yilmaz spillover model to examine the correlation between geopolitical events, natural disasters, and oil stock returns in Asian OPEC+ member countries. The study extends prior research by investigating the dynamics of the Asian OPEC+ oil market in light of recent exogenous events. The analysis commences by creating a self-generated Asian OPEC+ index, which demonstrates significant volatility, as indicated by GARCH (1, 1) model estimation. The results obtained from the Diebold and Yilmaz spillover test indicate that, on average, there is a moderate degree of connectedness among the variables. However, in the event of global-level shocks or shocks specifically affecting Asian OPEC+ countries, a heightened level of connectedness is found. Prominent instances of spillover events observed in the volatility analysis conducted during the previous decade include the COVID-19 pandemic, the conflict between Russia and Ukraine, and the Turkey earthquake of 2023. Based on the facts, it is recommended that investors take into account the potential risks linked to regions that are susceptible to natural calamities and geopolitical occurrences while devising their portfolios for oil stocks. The results further highlight the significance of integrating these aspects into investors’ decision-making procedures and stress the need for risk management tactics that consider geopolitical risks and natural disasters in the oil equity market.

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Section: Time-varying Diebold-yilmaz Connectednesssupporting

confidence: 87%

Spillovers across the Asian OPEC+ Financial Market

Vuković,

Dekpo-Adza,

Khmelnitskiy

et al. 2023

Mathematics

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“…Category-specific EPU indices were downloaded from the EPU website ( https://www.policyuncertainty.com ). Additionally, South Korea is one of the dividend nations after the Korean War armistice agreement; therefore, we employ the Geopolitical Risk index (GPR) of geopolitical risk from North Korea [ 17 ]. Every dataset included the sample period from January 2009 to September 2022 and was collected monthly after eliminating seasonal factors.…”

Section: Datamentioning

confidence: 99%

“…Currently, geopolitical risk is a crucial factor in stock volatility. The Geopolitical Risk Index, which is updated monthly, measures geopolitical risk through articles about military tensions, sanctions or economic cooperation [ 16 , 17 ]. Tzeng [ 18 ] found that using 20 US macroeconomic variables improves the volatility predictability of 11 Asian stock markets when combined forecasting methods are used.…”

Section: Introductionmentioning

confidence: 99%

Heterogeneous macroeconomic factors’ effects on stocks across sizes, styles, and sectors in the South Korean market

Cho,

Yang,

Jang

2024

PLoS ONE

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Knowledge of the key macroeconomic variables that influence stock volatility across capital sizes, styles, and sectors can provide clues for investment strategies and policy decisions. We use the GARCH-MIDAS model with feature selection to analyze Korean Benchmark Indices from 2009 to 2022. This study maximizes memory retention through an optimal fractional differentiated price series and uses an adaptive lasso penalty for feature selection. The housing price-sales index and realized volatility were consistently influential across most indices and sectors. The GARCH-MIDAS model, paired with these variables, significantly improves long-term stock volatility forecasts. This study underscores the need to monitor housing prices in South Korea because of their substantial effects on long-term stock volatility.

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“…This is very different to domestic newspapers, which provide more details on the events as well as the relevant context. Several studies have been conducted that use national media sources rather than international ones to investigate the impacts of GPRs on financial market, including those by Jung et al (2021) and Dibooglu and Cevik (2016). Second, the differing reactions of emerging and advanced economies might be caused by the differences in their economic and social nature.…”

Section: Gprs and Fs In G7 Economiesmentioning

confidence: 99%

Geopolitical risks and financial stress in emerging economies

NguyenHuu,

Örsal

2023

World Economy

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We investigate the impacts of geopolitical risks (GPRs) on financial stress (FS) in major emerging economies from 1985 to 2019. Applying a recently developed panel quantile estimation method, we show that GPRs pose serious risks to the stability of the financial condition in emerging economies. Namely, when FS is already equal to or above average, GPRs intensify this instability to a remarkable degree. Nevertheless, GPRs do not ignite the stress when the financial situation is benign. In emerging economies, foreign exchange markets and, to a lesser extent, the banking industry and the debt market suffer more severe consequences of geopolitical tensions than the stock market. In contrast, advanced economies, represented by the Group of Seven (G7), have witnessed detrimental consequences of GPRs on their stock markets, but negligible effects on other parts of their financial systems.

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Geopolitical Risk on Stock Returns: Evidence from Inter-Korea Geopolitics

Cited by 10 publications

References 20 publications

Spillovers across the Asian OPEC+ Financial Market

Spillovers across the Asian OPEC+ Financial Market

Heterogeneous macroeconomic factors’ effects on stocks across sizes, styles, and sectors in the South Korean market

Geopolitical risks and financial stress in emerging economies

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