Trade Policy Uncertainty and Global Stock Returns: Evidence from the 2016 US Presidential Election

52 Pages Posted: 8 Jun 2021

See all articles by Dien Giau Bui

Dien Giau Bui

Yuan Ze University

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Chih-Yung Lin

National Yang Ming Chiao Tung University

Chris Vaike

National Yang Ming Chiao Tung University

Date Written: June 5, 2021

Abstract

Pástor and Veronesi (2012) develop a general equilibrium model to examine the relation between policy uncertainty and asset prices. Extending to their study, we develop a novel measure of firms’ uncertainty about the change in bilateral trade flows between each country and the US. We investigate the effect of trade policy uncertainty on the stock returns of firms in 52 countries around the 2016 US presidential election. Our findings show that firms with greater uncertainty about trade policy experience more negative stock returns during the election. Our results further show that this effect is more prominent for riskier firms or firms with more firm-specific information in their stock prices. Additionally, this effect becomes stronger in countries with closer social, economic, and political integration with the US or with stronger investor protection.

Keywords: Trade policy uncertainty, stock return, bilateral trade flow, information asymmetry, and globalization

JEL Classification: F13, F23, G14, G15, G32

Suggested Citation

Bui, Dien Giau and Hasan, Iftekhar and Lin, Chih-Yung and Vaike, Chris, Trade Policy Uncertainty and Global Stock Returns: Evidence from the 2016 US Presidential Election (June 5, 2021). Available at SSRN: https://ssrn.com/abstract=3860623 or http://dx.doi.org/10.2139/ssrn.3860623

Dien Giau Bui

Yuan Ze University ( email )

135, Far-East Rd., Chung-Li
Taoyuan, ROC
Taiwan

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Chih-Yung Lin (Contact Author)

National Yang Ming Chiao Tung University ( email )

National chiao tung university, 1001 university ro
Hsinchu, 1001
Taiwan

Chris Vaike

National Yang Ming Chiao Tung University ( email )

National chiao tung university, 1001 university ro
Hsinchu, 1001
Taiwan

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