Impact of Geopolitical Risk on Defense Companies' Stock Returns
Author Information
Author(s): Gheorghe Catalin, Panazan Oana
Primary Institution: Transilvania University of Brașov, Romania
Hypothesis
Does geopolitical risk affect the stock prices of defense companies?
Conclusion
Geopolitical events significantly influence stock returns in the defense industry, with notable reactions following the Crimean Peninsula's annexation and the Russia-Ukraine war.
Supporting Evidence
- 50.6% of defense companies reacted immediately to the Crimean Peninsula's annexation in 2014.
- 30.6% of companies showed moderate negative effects during the COVID-19 pandemic.
- 81.4% of defense companies were impacted by the Russia-Ukraine war.
- The Israel-Hamas conflict had a local effect on Israeli defense companies.
Takeaway
When countries have conflicts, defense companies often see their stock prices go up or down. This study looked at how different events, like wars, affect these companies.
Methodology
The study used wavelet coherence and phase differences to analyze daily stock data from 75 defense companies over a period from January 1, 2014, to December 31, 2023.
Limitations
The study could not locate stock prices for 25 companies and did not include companies from Russia, the Middle East, and Eastern Europe.
Participant Demographics
The sample included 75 global defense companies from various countries, including the USA, China, UK, and others.
Digital Object Identifier (DOI)
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