Market reactions to the US-Houthi conflict: an event study of the US stock market

Rizky Yudaruddin, Dadang Lesmana, Nurhadiansjah Nurhadiansjah, Yanzil Azizil Yudaruddin and William Ginn

Journal of Economic Studies, 2025, vol. 53, issue 7, 1390-1409

Abstract: PurposeThis study aims to examine the market response to the US-Houthi conflict in the US stock market, focusing on sectoral differences, company size and growth rates.Design/methodology/approachUsing daily closing prices of 1,832 companies listed on major US stock indexes from December 1, 2022, to February 29, 2024, this study applies the event study methodology to assess market reactions. Multiple event windows, including 15-day pre- and post-event periods, are analyzed to capture comprehensive market responses. January 11, 2024, is designated as the event date, marking the declaration of war between the US and the Houthis, with a 250-trading-day estimation window used for benchmarking expected returns.FindingsThe findings indicate that the US-Houthi conflict significantly impacted the market, with defensive sectors such as healthcare and utilities responding positively, while sectors like energy and financials showed negative reactions. Smaller companies exhibited greater volatility, with a pattern of positive reactions before the event, negative responses during, and a recovery afterward. In contrast, large companies showed consistent positive reactions. Market reactions also varied by growth rates, with low- and medium-growth companies experiencing volatility and recovery, while high-growth companies, particularly in the energy sector, demonstrated resilience. These results highlight the differential impacts of geopolitical events based on sector, company size, and growth potential.Originality/valueThis study is the first to examine the impact of the US-Houthi conflict on the US stock market. It provides novel insights into how sectoral differences, company size and growth rates influence market reactions to geopolitical events.

Keywords: US-Houthi conflict; Market reaction; Event study; US market; Sector (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-02-2025-0128

DOI: 10.1108/JES-02-2025-0128

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