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Taiwan’s stock market resilience to increasing geopolitical risk

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  • López Prol, Javier

Abstract

Geopolitical risk, usually associated with negative financial impacts, has been on the rise worldwide. This paper assesses the effect of increasing geopolitical risk in Taiwan, measured as the number of incursions by the People’s Liberation Army (PLA) into Taiwan’s de facto Aerial Defense Identification Zone (ADIZ), on Taiwan’s stock market. Using flexible definitions of geopolitical risk across all levels of the Taiwan stock market, high-resolution data and a balanced fixed-effects panel specification of annualized, dividend-adjusted log returns, the results show that the Taiwan’s stock market is resilient to increasing geopolitical risks.

Suggested Citation

  • López Prol, Javier, 2025. "Taiwan’s stock market resilience to increasing geopolitical risk," Finance Research Letters, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325005823
    DOI: 10.1016/j.frl.2025.107319
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    More about this item

    Keywords

    Geopolitical risk; Aerial Defense Identification Zone (ADIZ) violations; Stock returns; Financial market; China; Taiwan;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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