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

Yitong Liu, Yunbiao Ma and Beibei Shi

Applied Economics Letters, 2024, vol. 31, issue 10, 875-879

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.

Date: 2024
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DOI: 10.1080/13504851.2022.2156454

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