Measuring North Korean Geopolitical Risks: Implications for Asia’s Financial Volatilities

This article proposes that level of attention can be a good proxy for measuring geopolitical risks on the Korean peninsula. People’s perception of the possibility of war occurrence may be constructed from information in Google news. Using a newly developed index, this study finds that geopolitical risks and Asian stock market volatilities are related. The findings suggest that geopolitical risks on the Korean peninsula originating from North Korea have affected not only South Korea but also other Asian financial markets. The magnitude of impact is determined by the objective fact of geopolitical events and by a country’s different levels of attention to the events.