Global Political Uncertainty and Asset Prices

• 成果类型: Article
• 署名作者: Brogaard, Jonathan; Dai, Lili; Ngo, Phong T. H.; Zhang, Bohui
• 署名单位: Utah System of Higher Education; University of Utah; University of New South Wales Sydney; Australian National University; The Chinese University of Hong Kong, Shenzhen; The Chinese University of Hong Kong, Shenzhen
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz087
• 发表日期: 2020
• 页码: 1737
• 关键词: VARIANCE DECOMPOSITION; FLIGHT HOME; long-run; STOCK; MARKET; volatility; LIBERALIZATION; POLICY; GROWTH; RESOLUTION

摘要

We show that global political uncertainty, measured by the U.S. election cycle, on average, leads to a fall in equity returns in fifty non-U.S. countries. At the same time, market volatilities rise, local currencies depreciate, and sovereign bond returns increase. The effect of global political uncertainty on equity prices increases with the level of uncertainty in U.S. election outcomes and a country's equity market exposure to foreign investors, but does not vary with the country's international trade exposure. These findings suggest that global political uncertainty increases investors' aggregate risk aversion, leading to a flight to safety.