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Semiconductor game of thrones: A comprehensive study of geopolitical and equity market uncertainty transmission

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  • Snarska, Małgorzata
  • Frydrych, Sylwia
  • Łukowski, Michał
  • Czech, Maria
  • Perez, Katarzyna

Abstract

The paper investigates the intricate relationship between geopolitical uncertainty and equity market uncertainty in the semiconductor sector, focusing on the American and Asian markets from 1990 to 2024. We propose new measures of both market and geopolitical uncertainty focusing on the spreads between fast and slow components of market indices and geopolitical risk index. We focus on informational content of our measures, by studying the transmission mechanisms between those measures using technological rivalry between China and US in the semiconductor sector as our economic background. Findings reveal that geopolitical uncertainty measures are informationally dense. Using proposed measures, we find that geopolitical uncertainty significantly impacts investor sentiment, market stability, and price expectations, with notable regional differences. American markets demonstrate a faster adjustment to geopolitical uncertainty compared to their Asian counterparts, which exhibit higher volatility and slower adaptation. The study also uncovers that heightened geopolitical uncertainty amplifies market uncertainty in the US, while in Asia, geopolitical shocks may paradoxically stabilize stock valuations. These insights offer valuable implications for investors and policymakers, highlighting the importance of risk management strategies tailored to geopolitical contexts.

Suggested Citation

  • Snarska, Małgorzata & Frydrych, Sylwia & Łukowski, Michał & Czech, Maria & Perez, Katarzyna, 2025. "Semiconductor game of thrones: A comprehensive study of geopolitical and equity market uncertainty transmission," International Review of Financial Analysis, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:finana:v:106:y:2025:i:c:s1057521925005447
    DOI: 10.1016/j.irfa.2025.104457
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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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