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Do natural disasters and geopolitical risks matter for cross-border country exchange-traded fund returns?

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  • Lee, Chien-Chiang
  • Chen, Mei-Ping

Abstract

This paper examines whether U.S. and home country geopolitical risks (GPRs) and disasters matter for the returns from cross-border trading of country exchange-traded funds (ETFs) by employing a quantile regression approach. Using monthly returns of 125 country-specific ETFs traded in the U.S. from 38 countries over the period 2004–2018, we find that the highest averages of total deaths, total damage values, total affected, and GPRs are all in developing countries. United States disasters have comparatively more significant impacts than home country disasters on ETF returns as does the salient influences of U.S. investor sentiments, supporting the market sentiment hypothesis. Moreover, U.S. and home country GPRs and disasters also have predictive power on returns. The contemptuous effects and predictive powers of GPRs and disasters are asymmetric across quantiles. The influences of home country GPRs are more salient than the GRPS of U.S., implying that ETFs can be a safe haven during U.S. geopolitical risks. Additionally, our results show that the impacts of disasters on returns can be negative and/or positive, implying the possibility of disasters exuding an impetus and/or risk to country ETFs.

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  • Lee, Chien-Chiang & Chen, Mei-Ping, 2020. "Do natural disasters and geopolitical risks matter for cross-border country exchange-traded fund returns?," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
  • Handle: RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819303183
    DOI: 10.1016/j.najef.2019.101054
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    Cited by:

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    More about this item

    Keywords

    Geopolitical risks; Disasters; Exchange-traded funds (ETFs); Quantile regression;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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