The Impacts of Geopolitical Events on the Developed and Developing Stock Markets

Abstract

The geopolitical conflicts/events usually have caused huge fluctuations on the stock market all over the world. Many scholars have studied the impacts that wars or changes of geopolitical relations on the stock markets. However, it is not clear whether the impacts on the developed and developing countries are the same. Therefore, in this article, we conclude and analyse how the stock markets react to geopolitical events respectively from developed and developing countries by reviewing and summarizing several previous 15 studies and looking at the Dow Jones Industrial Average Index and other stock indices. In the research of this paper, it is found that the reaction varies from countries to countries. For the developed countries, the reaction of the markets depends on their extent of participation in geopolitical events. For instance, the United States react much more slightly compared with the European Union. For developing countries, the reaction is closely connected with their regional or national factors, such as the characteristics of the markets or macro-control of the government, resulting in a gentle fluctuation. Generally speaking, the article provides a relatively complete summary for the effects of geopolitical events on the developed and developing stock markets, and suggests a better explanation of the markets' behaviours.