Event-Driven Strategy and the Market Response to North Korea’s Armed Provocation: A Time Series Data Analysis of South Korean Defense Stocks

Hyunjong Joo (), Andrew Moses, Lihui Chen, Hyeongil Kim, Hyunjoon Kang, Jinhyeok Noh and Seongbin Lee
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Hyunjong Joo: WAM Equity Partners
Andrew Moses: WAM Equity Partners
Lihui Chen: Brown University
Hyeongil Kim: MIT Innovation Headquarters
Hyunjoon Kang: MIT Innovation Headquarters
Jinhyeok Noh: Brown University
Seongbin Lee: MIT Innovation Headquarters

A chapter in New Perspectives and Paradigms in Applied Economics and Business, 2025, pp 19-28 from Springer

Abstract: Abstract In response to increased global geopolitical uncertainty, South Korea's defense industry, known as K-Defense, has attracted significant growth and international investment interest. This paper outlines an investment strategy tailored to the industry's specific characteristics, emphasizing the effects of North Korea's provocations on the stock trends of Korean defense companies. An event-driven trading strategy, merging technical analysis with traditional methods and utilizing a 3-day moving average alongside event-driven triggers, is proposed to gauge the geopolitical influences on defense stocks. Based on the results, event-driven strategies appeared to be more effective and efficient than the OBV method. These approaches outperform the OBV methodology in terms of return on investment with doing just 20% of transactions. The performance difference is ascribed to the event-driven approaches’ proactive strategy in anticipating and responding to market changes triggered by geopolitical events or significant company announcements. The decreased frequency of trading in event-driven techniques implies possible advantages in reducing transaction costs. This study highlights the benefits of event-driven trading techniques for investors in the unpredictable South Korean military sector, offering crucial insights for making well-informed decisions in this rapidly changing market.

Keywords: Event-driven strategy; Data analysis; Defense stock (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-77363-1_2

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DOI: 10.1007/978-3-031-77363-1_2

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