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On The Relationship Between Economic Policy Uncertainty, Geopolitical Risk And Stock Market Returns In South Korea: A Quantile Causality Analysis

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  • TOMIWA SUNDAY ADEBAYO

    (Faculty of Economics and Administrative Science, Department of Business Administration, Cyprus International University, 99040 Nicosia, Turkey)

  • SEYI SAINT AKADIRI

    (Research Department, Central Bank of Nigeria, Abuja, Nigeria)

  • HUSAM RJOUB

    (Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Cyprus4International University, Mersin 10, 99040 Haspolat, Turkey)

Abstract

In this research, we assess the influence of geopolitical risk (GPR), exchange rate (EXCH) and economic policy uncertainty (EPU) on South Korea stock market. Using monthly dataset covering the period from 1997 to 2021, we utilized the novel non-parametric causality-in-quantiles test initiated by Balcilar et al. (2017) to assess these associations. This study discovered that the effect of macroeconomic shocks in South Korea is diverse across the stock market, implying that the influence of these shocks is not consistent across the stock market in South Korea. Furthermore, this study revealed that the causal influence of EPU, GPR on the stock market is visible in mean and variance. Nonetheless, the causal influence of EXCH on the stock market can only be seen in the mean, with no indication of causation in the variance. We consider that these results are significant to South Korean stock market investors for the purposes of foreign portfolio diversification and establishing investing strategies during times of economic uncertainty.

Suggested Citation

  • Tomiwa Sunday Adebayo & Seyi Saint Akadiri & Husam Rjoub, 2022. "On The Relationship Between Economic Policy Uncertainty, Geopolitical Risk And Stock Market Returns In South Korea: A Quantile Causality Analysis," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-19, March.
    • Handle: RePEc:wsi:afexxx:v:17:y:2022:i:01:n:s2010495222500087
    DOI: 10.1142/S2010495222500087
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    Cited by:

    1. Feng, Jie & Gao, Junhong, 2023. "Natural resource curse hypothesis and governance: Understanding the role of rule of law and political risk in the context of China," Resources Policy, Elsevier, vol. 85(PB).
    2. Bouri, Elie & Hammoud, Rami & Kassm, Christina Abou, 2023. "The effect of oil implied volatility and geopolitical risk on GCC stock sectors under various market conditions," Energy Economics, Elsevier, vol. 120(C).
    3. Ze, Fu & Wong, Wing-Keung & Alhasan, Tariq kamal & Al Shraah, Ata & Ali, Anis & Muda, Iskandar, 2023. "Economic development, natural resource utilization, GHG emissions and sustainable development: A case study of China," Resources Policy, Elsevier, vol. 83(C).
    4. Wang, Feipeng & Wong, Wing-Keung & Wang, Zheng & Albasher, Gadah & Alsultan, Nouf & Fatemah, Ambreen, 2023. "Emerging pathways to sustainable economic development: An interdisciplinary exploration of resource efficiency, technological innovation, and ecosystem resilience in resource-rich regions," Resources Policy, Elsevier, vol. 85(PA).
    5. Zhang, Mingming & Wong, Wing-Keung & Kim Oanh, Thai Thi & Muda, Iskandar & Islam, Saiful & Hishan, Sanil S. & Abduvaxitovna, Shamansurova Zilola, 2023. "Regulating environmental pollution through natural resources and technology innovation: Revisiting the environment Kuznet curve in China through quantile-based ARDL estimations," Resources Policy, Elsevier, vol. 85(PA).
    6. Wang, Xiang & Yin, Jian & Yang, Yao & Muda, Iskandar & Abduvaxitovna, Shamansurova Zilola & AlWadi, Belal Mahmoud & Castillo-Picon, Jorge & Abdul-Samad, Zulkiflee, 2023. "Relationship between the resource curse, Forest management and sustainable development and the importance of R&D Projects," Resources Policy, Elsevier, vol. 85(PA).
    7. Dervis Kirikkaleli & Ibrahim Darbaz, 2022. "New insights into an old issue: modelling the U.S. food prices," Letters in Spatial and Resource Sciences, Springer, vol. 15(3), pages 675-689, December.
    8. Wei, Xuecheng & Hu, Weihua, 2023. "Revisiting resources curse hypothesis in China: Exploring the asymmetric effect of green investment and green innovation," Resources Policy, Elsevier, vol. 85(PB).
    9. Faheem Aslam & Paulo Ferreira & Haider Ali & Arifa & Márcia Oliveira, 2023. "Islamic vs. Conventional Equity Markets: A Multifractal Cross-Correlation Analysis with Economic Policy Uncertainty," Economies, MDPI, vol. 11(1), pages 1-18, January.
    10. Dong, Yangzi & Wong, Wing-Keung & Muda, Iskandar & Cong, Phan The & Duong Hoang, Anh & Ghardallou, Wafa & Ha, Ngo Ngan, 2023. "Do natural resources utilization and economic development reduce greenhouse gas emissions through consuming renewable and Clean Technology? A case study of China towards sustainable development goals," Resources Policy, Elsevier, vol. 85(PB).

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