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Geopolitical Risk and Defence Stocks: An empirical analysis of defence stock market performance

Bromée, Emma LU and Doek, Jochem LU (2024) NEKN02 20241
Department of Economics
Abstract
This study aims to investigate the market performance of defence stocks, with a focus on geopolitical risk. The recent developments related to geopolitical risk, the potential changes in the market sentiment towards defence firms in connection to these and the little examination of the relationship between defence stock market performance and geopolitical risk open the possibility for contributing a new perspective on defence stocks. This study therefore analyses defence stock market performance in the U.S. and European markets during 2010–2023, utilising pooled panel data regression models estimated with OLS and incorporating a geopolitical risk index as well as different dummy variables to study the effect of changes in geopolitical... (More)
This study aims to investigate the market performance of defence stocks, with a focus on geopolitical risk. The recent developments related to geopolitical risk, the potential changes in the market sentiment towards defence firms in connection to these and the little examination of the relationship between defence stock market performance and geopolitical risk open the possibility for contributing a new perspective on defence stocks. This study therefore analyses defence stock market performance in the U.S. and European markets during 2010–2023, utilising pooled panel data regression models estimated with OLS and incorporating a geopolitical risk index as well as different dummy variables to study the effect of changes in geopolitical risk. Our findings show that defence firms perform worse than control firms in general and that increased geopolitical risk affects stock markets negatively. However, defence firms are found to be less negatively or even positively affected by increased geopolitical risk. Defence stock performance in European markets is seen to be positively affected by increased geopolitical risk or the event of war. The performance of American defence stocks is only shown to be less negatively affected by increased geopolitical risk than that of the control firms. (Less)
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author
Bromée, Emma LU and Doek, Jochem LU
supervisor
organization
course
NEKN02 20241
year
type
H1 - Master's Degree (One Year)
subject
keywords
defence stocks, geopolitical risk, market performance
language
English
id
9156502
date added to LUP
2024-08-12 15:55:12
date last changed
2024-08-12 15:55:12
@misc{9156502,
  abstract     = {{This study aims to investigate the market performance of defence stocks, with a focus on geopolitical risk. The recent developments related to geopolitical risk, the potential changes in the market sentiment towards defence firms in connection to these and the little examination of the relationship between defence stock market performance and geopolitical risk open the possibility for contributing a new perspective on defence stocks. This study therefore analyses defence stock market performance in the U.S. and European markets during 2010–2023, utilising pooled panel data regression models estimated with OLS and incorporating a geopolitical risk index as well as different dummy variables to study the effect of changes in geopolitical risk. Our findings show that defence firms perform worse than control firms in general and that increased geopolitical risk affects stock markets negatively. However, defence firms are found to be less negatively or even positively affected by increased geopolitical risk. Defence stock performance in European markets is seen to be positively affected by increased geopolitical risk or the event of war. The performance of American defence stocks is only shown to be less negatively affected by increased geopolitical risk than that of the control firms.}},
  author       = {{Bromée, Emma and Doek, Jochem}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Geopolitical Risk and Defence Stocks: An empirical analysis of defence stock market performance}},
  year         = {{2024}},
}