02539cas a2200337 a 4500 AALejournalIMF022140 230101c9999 xx r poo 0 0eng d 5.00 USD 9781557759672 1018-5941 BD-DhAAL BD-DhAAL Jung, Seungho. Geopolitical Risk on Stock Returns : Evidence from Inter-Korea Geopolitics / Seungho Jung, Jongmin Lee, Seohyun Lee. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (36 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns. Mode of access: Internet General Financial Markets imf Geopolitical Risk, Textual Analysis and Stock Returns imf GPRNK Index imf Information, Knowledge, and Uncertainty imf National Security and War imf Stock Return imf Lee, Jongmin. Lee, Seohyun. IMF Working Papers; Working Paper ; No. 2021/251 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/251/001.2021.issue-251-en.xml IMF e-Library