Taiwan’s stock market resilience to increasing geopolitical risk

Javier López Prol

Finance Research Letters, 2025, vol. 80, issue C

Abstract: Geopolitical risk, usually associated with negative financial impacts, has been on the rise worldwide. This paper assesses the effect of increasing geopolitical risk in Taiwan, measured as the number of incursions by the People’s Liberation Army (PLA) into Taiwan’s de facto Aerial Defense Identification Zone (ADIZ), on Taiwan’s stock market. Using flexible definitions of geopolitical risk across all levels of the Taiwan stock market, high-resolution data and a balanced fixed-effects panel specification of annualized, dividend-adjusted log returns, the results show that the Taiwan’s stock market is resilient to increasing geopolitical risks.

Keywords: Geopolitical risk; Aerial Defense Identification Zone (ADIZ) violations; Stock returns; Financial market; China; Taiwan (search for similar items in EconPapers)
JEL-codes: C5 D74 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325005823

DOI: 10.1016/j.frl.2025.107319

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