Pricing Protest: The Response of Financial Markets to Social Unrest

IMF Working Papers, March 19, 2021

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Canonical URL: Pricing Protest: The Response of Financial Markets to Social Unrest

Using a new daily index of social unrest, the study provides systematic evidence on the negative impact of social unrest on stock market performance.
An average social unrest episode in an typical country causes a 1.4 percentage point drop in cumulative abnormal returns over a two-week event window.
The drop in cumulative abnormal returns is more pronounced for events that last longer.

Effects are larger for events that happen in emerging markets.
Stronger institutions mitigate the adverse impact of social unrest on stock market returns.

Institutional strength—particularly better governance and more democratic systems—reduces the negative stock market response to social unrest.

The analysis uses a new daily index of social unrest and applies event-study methods to measure cumulative abnormal returns over a two-week event window.

Drop in cumulative abnormal returns: 1.4 percentage point (average episode, two-week event window)
Subject tags included in the source: Economic sectors, Financial crises, Financial institutions, Financial markets, Income, National accounts, Stock markets, Stocks
Keywords included in the source: abnormal returns, Asia and Pacific, cumulative abnormal returns, event study, Global, Income, income group, institutions, market liberalization reform, market model, Social unrest, stock index, stock markets, Stocks
Pages: 70
Series: Working Paper No. 2021/079
DOI: https://doi.org/10.5089/9781513572765.001
Publication date: March 19, 2021
Authors: Philip Barrett, Sophia Chen, Mali Chivakul, Deniz O Igan

IMF Working Paper No. 2021/079, Philip Barrett, Sophia Chen, Mali Chivakul, and Deniz O Igan (March 19, 2021).