TY - JOUR
T1 - Precarious Politics and Return Volatility
AU - Boutchkova, Maria
AU - Durnev, A
AU - Doshi, H
AU - Molchanov, A
PY - 2012
Y1 - 2012
N2 - We examine how local and global political risks affect industry return volatility. Our central premise is that some industries are more sensitive to political events than others. We find that industries that are more dependent on trade, contract enforcement, and labor exhibit greater return volatility when local political risks are higher. Political uncertainty in countries of trading partners of trade-dependent industries similarly results in greater volatility. Volatility decomposition results indicate that while systematic volatility is associated with domestic political uncertainty, global political risks translate into larger idiosyncratic volatility.
AB - We examine how local and global political risks affect industry return volatility. Our central premise is that some industries are more sensitive to political events than others. We find that industries that are more dependent on trade, contract enforcement, and labor exhibit greater return volatility when local political risks are higher. Political uncertainty in countries of trading partners of trade-dependent industries similarly results in greater volatility. Volatility decomposition results indicate that while systematic volatility is associated with domestic political uncertainty, global political risks translate into larger idiosyncratic volatility.
UR - http://www.scopus.com/inward/record.url?scp=84858687598&partnerID=8YFLogxK
U2 - 10.2139/ssrn.1317834
DO - 10.2139/ssrn.1317834
M3 - Article
SN - 1465-7368
VL - 25
SP - 1111
EP - 1154
JO - The Review of Financial Studies
JF - The Review of Financial Studies
IS - 4
ER -