Pricing protest: the response of financial markets to social unrest

Philip Barrett; Mariia Bondar; Sophia Chen; Mali Chivakul; Deniz Igan

doi:10.1093/rof/rfae008

Review of Finance Vol. 28 No. 4 2024

Pricing protest: the response of financial markets to social unrest

Philip Barrett¹; Mariia Bondar²; Sophia Chen¹; Mali Chivakul³; Deniz Igan⁴

¹ International Monetary Fund , Washington, DC, · ² Charles River Associates , Munich, · ³ Bank J. Safra Sarasin Ltd. , Basel, · ⁴ Bank for International Settlements and CEPR , Basel,

Abstract

We identify start days of 156 episodes of social unrest from textual analysis of media reports and show a systematic negative impact of social unrest on stock market performance. Social unrest on average leads to a 1.4 percentage point drop in cumulative abnormal returns in 2 weeks, more for events that last longer and that happen in emerging markets. Stronger institutions, particularly better governance and more democratic systems, are associated with a smaller adverse impact of social unrest on stock market returns. We argue this reflects the ability of better institutions to provide a more reliable way to reconcile conflicting views and dampen uncertainty after unrest.

DOI: 10.1093/rof/rfae008
Volume: 28
Issue: 4
Pages: 1419-1450
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Pricing protest: the response of financial markets to social unrest

Abstract

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