| dc.description.abstract | War is closer to us than we might expect. Although the total number of wars has decreased
since World War II, the frequency and scale of wars have gradually increased over the past
decade, as seen in conflicts such as the Ukraine-Russia conflict, the Israel-Palestine war, and
the Sudan conflict. These events remind us that the threat of war remains. War has a profound
impact on the global investment environment. Whenever a war breaks out, markets typically
experience severe fluctuations as investors react to uncertainty and risk. For example, the
Ukraine-Russia conflict led to significant volatility in energy prices, while the Israel-Palestine
war increased investment risk in the Middle East. War affects not only specific industries, such
as the defense and energy sectors but also the overall investment risk of entire regions.
Therefore, investors need to pay attention to war announcements, quickly understand the
dynamics of the war, and make corresponding investment decisions. This not only helps in
short-term risk management but also provides crucial information to predict long-term market
trends, enabling the formulation of more comprehensive investment strategies.
In previous academic studies, it has been found that war announcements are negatively
correlated with stock market returns, as shown by Kamal et al. (2023) . However, these studies
have mostly focused on short-term investor reactions to the announcements. I am curious
whether this impact extends into the long term. Besides the need for investors to strategically
plan for risk management before a war begins, they should also be well-prepared for the endof-war declarations. It is worth investigating whether end-of-war announcements elicit different
reactions from investors. Particularly interesting is how the outcomes of wars, whether victory
or defeat, affect investors, including those focusing on different industries. Such research not
only fills gaps in the existing literature but also provides more comprehensive guidelines for
investors and policymakers.
This study explores the impact of war announcements and end-of-war declarations on global
and regional stock markets, analyzing different types of war events and regional reactions.
Using the event study methodology, this paper examines multiple war events from 1970 to 2023,
calculating the average abnormal returns (AAR) and cumulative average abnormal returns
(CAAR). The results show that war announcements cause a short-term negative impact on
investors, with effects lasting up to 30 days after the event, while end-of-war announcements
lead to a long-term positive impact, extending up to 150 days post-event. Furthermore, the
analysis of war outcomes reveals that victory announcements have a significantly positive
impact compared to defeat announcements, which tend to have a negative but not significant
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impact. This pattern holds across different regions. For investors focusing on various industries,
it is found that the longer the time since the war ended, the positive impact of the end-of-war
announcement gradually turns negative. Additionally, it is observed that the longer the war
duration, the more negative the impact on industries.
Keywords: event study methodology, efficient market hypothesis, geopolitical risk | en_US |