How Do International Events Affect the Stock Market? By KRISTOF KAROLYI

Political Events

Political actions, statements or change(such as elections); play a great role in the fluctuation or decline of the price of specific shares on the stock market. The question many may ask is; how do these political events actually affect the prices of shares- what causes this?

Overall, the prices of shares alter due to the demand in the specific shares. If there is no demand for a share(no one is buying these shares), the prices will decrease. A specific political event could lead to investors not having demand in stocks of a specific economy or shares of a specific company. For example, a political statement could affect the operation of a company or an election or change in political system could create an "unstable" scene in the economy, hence overall affecting the price of shares.

During presidential election years overall in the US, the prices on the stock market overall increase by an average of 7.6%. Furthermore, if the incumbent party remains, the average increase is by an average of 15.1%, while if the incumbent party loses, the average increase(decrease) is -4.4%. A decrease occurs as investors are usually "unsure" of how the new incumbment party will handle their affairs(Mahn). Finally, presidential elections and overall political events greatly effect the prices of shares on the stock market.

NATURAL dISASTERS

Since, the prices of shares alter due to the demand in the specific shares. If there is no demand for a share(no one is buying these shares), the prices will decrease. A specific natural disaster could lead to investors not having demand in stocks of a specific economy or great problems occurring in the economy. Natural disasters such as earthquakes, hurricanes or land slides can lead to economical problems of a country, hence altering the prices of shares in that specific zone.

Damages caused by a specific natural disaster can lead to great damages, hence problems in the economy of a nation. In 2009, the Katarina Hurricane in the US caused damages up to 80 million USD, which caused a small overall alteration in the average prices of shares(Maierhofer). Though natural disasters do not affect the prices of shares at a high rate like political events, they are still relevant and lead to the alteration to the average price of shares on the stock market.

Military/Terrorist events

Since, the prices of shares alter due to the demand in the specific shares. If there is no demand for a share(no one is buying these shares), the prices will decrease. A specific military/terrorist event could lead to investors not having demand in stocks of a specific economy or great problems occurring in the economy. Terrorism could lead a nation's economy to a downfall, and could overall lead investors to not have "trust" in the economy and policies of the specific country.

2001 September 11 attacks

The terror attacks in the United States on September 11th in 2001 had an overall great affect on the stock market. The terror attacks lead to the closure of stock market in the US for the rest of the week. Though it was re-opened in just 4 trading days, the average price of shares have dropped 11.6% (Maierhofer). Overall, military/terrorist events over the world can lead to a great alteration in the average price of shares on the stock market.

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Created with images by PublicDomainPictures - "business cash coin" • janeb13 - "barack obama official portrait president of the" • yisris - "Tsunami catastrophe" • WikiImages - "fighter jet fighter aircraft aircraft"

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