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Geopolitical risk and household stock market participation

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  • Lee, Kiryoung

Abstract

I find that the index of geopolitical risk (GPR) is significantly associated with both the extensive and intensive margins of stock market participation decisions. The GPR index subsumes the significance of economic policy uncertainty for stock market participation decisions and has long-lasting effects for up to 12 months. I further investigate the economic channel through which the GPR index is associated with stock market participation. Empirical evidence suggests that it is a link between the GPR index and financial uncertainty that drives the results. However, I do not find evidence supporting the income uncertainty channel.

Suggested Citation

  • Lee, Kiryoung, 2023. "Geopolitical risk and household stock market participation," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005074
    DOI: 10.1016/j.frl.2022.103328
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    Cited by:

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    5. Khan, Khalid & Khurshid, Adnan & Cifuentes-Faura, Javier, 2023. "Investigating the relationship between geopolitical risks and economic security: Empirical evidence from central and Eastern European countries," Resources Policy, Elsevier, vol. 85(PA).

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    More about this item

    Keywords

    Geopolitical risk; Household finance; Portfolio choice; Stock market participation; Financial uncertainty; Income uncertainty;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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