The Impact of North Korea Threats on Stock Return Volatility
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We use media news reports concerning North Korea threats from 2016 to 2017 to measure the magnitude of geopolitical risk on the Korean Peninsula and analyze the impact of the geopolitical risk on the risk components of Korean stocks. Our result shows that the North Korea risk significantly increases the volatility of domestic stock returns, which is mainly attributable to an increase in systematic risk rather than unsystematic risk of the stocks. This finding remains robust when alternative measures of the systematic risk are used. The evidence in this study suggests that geopolitical risk on the Korean Peninsula is an important factor that can affect stock prices by increasing the systematic risk of stocks.
Abstract
We use media news reports concerning North Korea threats from 2016 to 2017 to measure the magnitude of geopolitical risk on the Korean Peninsula and analyze the impact of the geopolitical risk on the risk components of Korean stocks. Our result shows that the North Korea risk significantly increases the volatility of domestic stock returns, which is mainly attributable to an increase in systematic risk rather than unsystematic risk of the stocks. This finding remains robust when alternative measures of the systematic risk are used. The evidence in this study suggests that geopolitical risk on the Korean Peninsula is an important factor that can affect stock prices by increasing the systematic risk of stocks.
참고문헌 (26)
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