The aim of this term paper is, to find out which influence political events have on the international stock market. To clarify this question, first of all the basic concepts of the stock market and international politics are explained. Based on these fundamentals, the approach of the realistic theory of Hans Morgenthau is considered. In addition, direct and indirect influences of politics are presented and discussed.
The following explains the basic principle of the stock market and various products with their specific characteristics. Subsequently, the effects of direct influences on and the effects of indirect influences on the stock market are examined. Practical examples show what investor behavior can be observed and whether one can recognize recurrent patterns of behavior for particular types of events.
Not only events, like elections and referendums have indirect influence on the world wide stock exchange. Even daily news of sudden crises and wars around the world can change the behavior of investors massively. On the other side, political decisions, that are announced for a long time, like sanctions, subsidies and punitive tariffs, can lead to unexpected courses on the stock exchange, too. Investors and traders around the world have to handle these sudden movements carefully to not lose a lot of money, or better, to make profit. But different events have different results. And depending on where the traders are in the market, they behave different.
Table of Contents
1 Introduction
1.1 Problem setting
1.2 Objective
2 Conceptual foundation
2.1 International policy
2.2 Stock exchange
3 Trade Policy
3.1 Approach to Hans J. Morgenthau
3.2 Direct influences in the world economy
3.2.1 Sanctions
3.2.2 Subsidies
3.3 Indirect influences on the world economy
3.3.1 Referendums
3.3.2 Wars
3.3.3 Attacks
3.3.4 Force majeure
4 Stock Exchange
4.1 Supply & demand
4.2 Investment products
5 Investor behavior in practice
5.1 Reaction to direct economic influences
5.2 Reaction to indirect economic influences
6 Conclusion
Objectives and Core Topics
The primary objective of this term paper is to analyze the influence of political events on the international stock market. By examining basic concepts of economics and international politics, the work investigates whether consistent patterns of investor behavior emerge in response to various direct and indirect political triggers.
- The relationship between political power and global economic markets.
- Direct economic interventions such as sanctions and subsidies.
- Indirect political influences including elections, referendums, and wars.
- Psychological aspects of investor behavior during times of crisis.
- Empirical analysis of historical market reactions to major political events.
Excerpt from the Book
3.2.1 Sanctions
Economic sanctions are considered to be one of the most influential instruments of policy to influence the behavior of other countries. Sanctions are initially considered a punitive method and have multiple purposes. First, they aim to change the behavior of a state, prevent alternative (military) means of resolving conflicts, and demonstrate inward and outward determination, thus demonstrating compliance with the norm. The sanctioning measures depend heavily on the country of destination and the purpose the other party wishes to achieve. In resource-poor countries, it makes sense to limit the exports of raw materials to this country, to impose high punitive tariffs or even to refrain altogether. They take goods from this country, which they import mainly from abroad, because there are too few resources in their own country or the mining would cost a lot of money.
However, for the sanctioning state, this goal cannot be achieved without making a compromise, because penalties always have disadvantages, even for the sanctioning country. If exports from their own country to the target country are throttled, this leads to a deficit, which weaken their own economy, thus significantly reducing the GDP and endanger jobs.
Summary of Chapters
1 Introduction: This chapter defines the problem setting regarding the sensitivity of stock markets to political events and outlines the objective of the study.
2 Conceptual foundation: This section establishes the theoretical framework, defining core concepts of international policy and stock exchange mechanisms.
3 Trade Policy: This chapter explores Hans J. Morgenthau’s realistic theory and categorizes both direct and indirect political influences on the global economy.
4 Stock Exchange: This section explains the principles of supply and demand and details common investment products such as shares, funds, and commodities.
5 Investor behavior in practice: This chapter provides an empirical analysis of how investors react to direct and indirect economic influences using historical case studies.
6 Conclusion: This chapter synthesizes the findings, noting the unpredictability of market reactions and suggesting directions for future research.
Keywords
International politics, Stock market, Investor behavior, Sanctions, Subsidies, Referendums, War, Terrorism, Market volatility, Supply and demand, Economic performance, Global economy, Hans J. Morgenthau, Portfolio management, Trade policy.
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the correlation between international political events and the performance of global stock markets, focusing on how political decisions affect investor behavior.
What are the central thematic fields?
The core themes include international relations theory, the mechanisms of stock exchanges, the impact of government sanctions and subsidies, and the consequences of geopolitical instability like wars and terrorist attacks.
What is the primary research objective?
The aim is to determine the extent of political influence on international markets and to see if there is a predictable pattern in how investors respond to these triggers.
Which scientific method is utilized?
The paper applies a combination of theoretical analysis based on the realistic school of international relations and empirical case studies comparing historical market performance indices.
What is covered in the main body of the text?
The main body covers the conceptual definitions of international politics and stock markets, followed by an in-depth exploration of trade policy instruments and historical data on market fluctuations.
Which keywords characterize the work?
Key terms include political risk, stock market reaction, investor sentiment, sanctions, trade policy, and market volatility.
How do investors typically react to sanctions?
The study suggests that investor reactions to state-imposed sanctions are often nuanced and rarely result in dramatic, immediate market crashes, provided the actions are anticipated.
What role does the 'realistic theory' of Hans J. Morgenthau play?
His theory serves as the ideological foundation for understanding international politics as a quest for power, which explains why states utilize economic tools like sanctions for national interest.
Did the paper identify a consistent pattern of behavior?
No, the author concludes that no universal scheme or pattern exists, as investor responses vary greatly depending on the specific context and historical circumstances.
- Citar trabajo
- Yannick Schüller (Autor), 2018, International politics and multilateral relations. The influence of politic events on the international stock exchange, Múnich, GRIN Verlag, https://www.grin.com/document/497055
