The impact of geopolitical risks on travel and leisure stocks

Abstract

The impact of geopolitical risks on tourism has not received scholarly attention in the existing literature. Previous studies focus on the effects of terrorism, which is a subset of geopolitical risks. Our paper fills this gap and contributes to the literature by analyzing the vulnerability of four regional Travel and Leisure (T&L) industry stock indices to geopolitical risks. Employing traditional and quantile regression techniques, our results suggest a greater sensitivity of T&L stock returns to geopolitical risks at times the industry performs poor, except for Asia & Pacific index that is the most resilient to geopolitical events. We find that the negative effects of geopolitical risks are mostly driven by the threat of adverse geopolitical events only during period of falling T&L stock prices. However, the realization of adverse geopolitical events significantly influences T&L stocks at all times. The results provide potential insights and implications for investors and tourism stakeholders.

Hedging Global and Country-Specific Geopolitical Risks With South Korean Stocks: A Predictability Approach

“…However, as the hedging effectiveness coefficient is higher for country-specific geopolitical risk compared to the global geopolitical risk, the South Korean stock market may hedge domestic geopolitical risk better than the global geopolitical risk. This result is similar to that of Dos Santos et al (2021), who concluded that local political risk had a more significant impact on risk-premium volatility than global risk (see also Demiralay & Kilincarslan, 2019). By implication, investors may not need to divest out of the South Korean stock market in fear of global and/ or South Korean geopolitical risks.…”

How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique

“…As far as geopolitical risk is concerned, it is showing a negative impact in the bullish market for both types of securities, which is logically appealing as an increase in geopolitical risk should have deteriorating efforts on equity prices. This significant impact of GPR on stocks is confirmed by Demiralay & Kilincarslan (2019). Balcilar et al (2018) found a nonuniform association between GPR and stocks in BRICS markets.…”

Asymmetric effects of geopolitical risks on Turkey's tourist arrivals

“…It is found that the impact of geopolitical risks is stronger than that of economic policy uncertainties. In terms of stock market effects, Demiralay and Kilincarslan (2019) examine the impact of GPRs on the Travel and Leisure industry stock indices. They document the negative effect of GPRs on T&L stock index returns except for Asia &Pacific.…”