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Trade policy sensitivity and global stock returns: Evidence from the 2016 U.S. Presidential election

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  • Bui, Dien Giau
  • Hasan, Iftekhar
  • Lin, Chih-Yung
  • Mai, Ngoc Thuy
  • Vaike, Chris

Abstract

This paper introduces a novel measure to quantify firms’ sensitivity to shifts in bilateral trade flows between the United States and its trading partners. We exploit the 2016 U.S. presidential election as an exogenous shock to trade policy expectations and assess the stock market reactions of firms across 52 countries. Our findings indicate that firms with higher trade policy sensitivity experienced significantly more negative stock returns surrounding the election. These results are robust to variations in event windows, return model specifications, and alternative estimations of trade policy sensitivity.

Suggested Citation

  • Bui, Dien Giau & Hasan, Iftekhar & Lin, Chih-Yung & Mai, Ngoc Thuy & Vaike, Chris, 2025. "Trade policy sensitivity and global stock returns: Evidence from the 2016 U.S. Presidential election," Journal of Banking & Finance, Elsevier, vol. 178(C).
    • Handle: RePEc:eee:jbfina:v:178:y:2025:i:c:s0378426625001372
    DOI: 10.1016/j.jbankfin.2025.107517
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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