Nancy Pelosis Visit to Taiwan and Stock Indices Responses: An Event Study and Panel Data Analysis for Asia-Pacific and Selected Markets

Abstract

Traditional financial market-based analyses of the anticipated effects of policy changes have only ever been retrospective. In this study, we provide an example to illustrate how prediction markets enable markets to be used to estimate policy effects in the future. In this article, we use an event study approach to empirically study the effect of Nancy Pelosi’s visit to Taiwan on stock indices performance in the Asia-Pacific region, the United States, and selected indices in Europe. The observed window comprises 10 days post the Nancy Pelosi’s visit, and the estimation window consists of 150 days before the event date. We found that the effect of visit has not been significant on the stock indices except Hong-Kong and China that too for very short-term. Our analysis enables us to identify how not all the news would be having an impact on stock indices. The investment community and academics can predict stock return behaviour and the dynamics of the first two minutes during crises by observing how stock return behaviour changes in response to financial crises.

DOI: https://doi.org/10.21863/jcar/2024.13.1.005

Keywords: Event Study, Nancy Pelosi, Panel Data, Abnormal Returns, Asia-Pacific Markets

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