Pricing Protest: The Response of Financial Markets to Social Unrest

Pricing Protest: The Response of Financial Markets to Social Unrest
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Volume/Issue: Volume 2021 Issue 079
Publication date: March 2021
ISBN: 9781513572765
$18.00
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Topics covered in this book

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Finance , Economics- Macroeconomics , Economics / General , International - Economics , Social unrest , stock markets , abnormal returns , event study , institutions , cumulative abnormal returns , market model , stock index , income group , market liberalization reform , Stocks , Income , Global , Asia and Pacific

Summary

Using a new daily index of social unrest, we provide systematic evidence on the negative impact of social unrest on stock market performance. An average social unrest episode in an typical country causes a 1.4 percentage point drop in cumulative abnormal returns over a two-week event window. This drop is more pronounced for events that last longer and for events that happen in emerging markets. Stronger institutions, particularly better governance and more democratic systems, mitigate the adverse impact of social unrest on stock market returns.