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Liquidity Challenges in Non-US Energy Stocks: Assessing the Impact of Terrorism and Geopolitical Risks

Author

Listed:
  • Lee Kersting
  • Jang-Chul Kim
  • Qing Su

Abstract

This paper examines how terrorism and geopolitical risk impact the liquidity of non-U.S. energy stocks listed on the New York Stock Exchange (NYSE). We find that countries with higher terrorism risk have wider bid-ask spreads, smaller market depth, and poorer market quality, thus suggesting lower liquidity. We also find that higher terrorism risk leads to increased information-based trading. In addition, the effect of terrorism risk on liquidity is not uniform across the energy sector. Specifically, we find the Oil and Gas Extraction and Utility sectors exhibit lower liquidity in countries with higher terrorism risk. However, this effect is opposite for Supporting Activities for Mining, Quarrying, and Oil and Gas Extraction sector. Additionally, we investigate how the Crimean crisis affects the liquidity of non-U.S. energy stocks and find that the crisis results in lower liquidity and higher information-based trading for these stocks. JEL Classification: G14, G38, Q43

Suggested Citation

  • Lee Kersting & Jang-Chul Kim & Qing Su, 2025. "Liquidity Challenges in Non-US Energy Stocks: Assessing the Impact of Terrorism and Geopolitical Risks," The Energy Journal, , vol. 46(3), pages 195-215, May.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:3:p:195-215
    DOI: 10.1177/01956574241306338
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    More about this item

    Keywords

    terrorism; bid-ask spreads; geopolitical risk; liquidity; information-based trading; energy stocks;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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