Does Geopolitical Risk Influence China’s Defence Sector Returns?

Wang Yu () and Liu Yun
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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

Peace Economics, Peace Science, and Public Policy, 2023, vol. 29, issue 3, 279-287

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.

Keywords: China; defence sector; geopolitical risk; stock market; time series (search for similar items in EconPapers)
JEL-codes: C32 F50 G10 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/peps-2023-0027

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