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Does Geopolitical Risk Influence China’s Defence Sector Returns?

Author

Listed:
  • Wang Yu

    (School of Public Policy, University of Calgary, 5th Floor, 906 8th Avenue SW, Calgary, AB, T2P 1H9, Canada)

  • Liu Yun

    (Department of International Studies, Xi’an Jiaotong-Liverpool University, Suzhou, China)

Abstract

This study utilizes a rolling window Granger test to investigate how global geopolitical tension affects returns in China’s defence sector. The results reveal a highly dynamic and nonlinear relationship between geopolitical risk and the industry’s stock market performance. Notably, our findings suggest that geopolitical risk has recently become a significant predictor of the market return of the defence sector. These results contribute to the existing literature on the impact of geopolitical uncertainties on China’s financial markets and offer new insights into the relationship between international security and the stock market performance of defence contractors. We discuss the implications of this research at the end.

Suggested Citation

  • Wang Yu & Liu Yun, 2023. "Does Geopolitical Risk Influence China’s Defence Sector Returns?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 29(3), pages 279-287, September.
    • Handle: RePEc:bpj:pepspp:v:29:y:2023:i:3:p:279-287:n:4
    DOI: 10.1515/peps-2023-0027
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    More about this item

    Keywords

    China; defence sector; geopolitical risk; stock market; time series;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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