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Shock Waves of Political Risk on the Stock market: The Case of Korean Companies in the U.S.

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Authors
Pak, Yunjung; Kim, Youngjin; Song, Min; Kim, Yonghak
Issue Date
2015-06
Publisher
Institute for Social Development and Policy Research, Center for Social Sciences, Seoul National University
Citation
Development and Society, Vol.44 No.1, pp. 143-165
Keywords
public newsasymmetric informationstock volatilitysentiment analysissemi-supervised learning
Abstract
We introduce a method to examine the effects of the U.S. news sentiments on Korean firms listed on the New York Stock Exchange (NYSE) when North Korea causes geo-political risks to the South Korean economy. Stock prices are evaluated by market factors and return to their fundamental values in the long term. Nevertheless, external shocks such as geo-political and international risks often cause stock volatility. Using a semi-supervised machine learning approach, we classify negative and positive news from five major newspapers in the U.S. to scrutinize the degree of North Korean risk and its influence on the stock prices of Korean firms listed on the NYSE. We find that news related to North Korea have an impact on the stock volatility in the U.S. and Korea. We could detect the direct impact of political risk posed by North Korea on the NYSE, but it was weaker than their indirect effects through the Korean stock Market.
ISSN
1598-8074
Language
English
URI
http://hdl.handle.net/10371/95281
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College of Social Sciences (사회과학대학)Institute for Social Development and Policy Research (사회발전연구소)Development and Society Development and Society Vol.44 No.1/3 (2015)
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