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Market reactions to political uncertainty: evidence from Taiwan accidentally fires Missile towards Mainland China

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  • Yitong Liu
  • Yunbiao Ma
  • Beibei Shi

Abstract

This letter examines the impact of political uncertainty on stock prices by utilizing a quasi-experiment, i.e. Taiwan accidentally fires a missile towards mainland China. As this missile accident was entirely unforeseen by investors in the market, it provided a complete exogenous shock causing political uncertainty. We find that the political uncertainty caused by the events has significant negative effects on stock prices, especially for firms that have economic and geographical connections with Taiwan or are adjacent to Taiwan.

Suggested Citation

  • Yitong Liu & Yunbiao Ma & Beibei Shi, 2024. "Market reactions to political uncertainty: evidence from Taiwan accidentally fires Missile towards Mainland China," Applied Economics Letters, Taylor & Francis Journals, vol. 31(10), pages 875-879, June.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:10:p:875-879
    DOI: 10.1080/13504851.2022.2156454
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