Keywords

Geopolitical Risk; War Risk; Asset Allocation; Institutional Investors; Mutual Funds

Abstract

My first essay studies how global institutional investors adjust cross-country equity allocations in response to rising geopolitical risk. Using quarterly equity holdings of institutional investors over 1997–2023, combined with news-based global and country-specific geopolitical risk indices, I find that following increases in geopolitical risk within a country, foreign institutions actively reduce their allocations in that country and the nearby region. Elevated global geopolitical uncertainty triggers both a flight-to-home response toward domestic equities and a flight-to-safety effect toward U.S. equities. Investor responses are heterogeneous: Institutions with higher geopolitical risk sensitivity respond more aggressively, whereas larger or better-performing hedge funds often maintain or even expand geopolitical risk exposure. The evidence reveals how investor responses transmit geopolitical risk shocks through the global equity market.

My second essay focuses on how U.S. mutual funds actively manage war-related risk. I construct a fund-level war beta based on stock sensitivity to a war innovation factor and show that funds with higher exposure to “war-safe” stocks earn superior returns, particularly during periods of elevated war attention. This outperformance is driven by active rebalancing rather than passive exposure and persists for several months. Moreover, changes in fund exposure predict future increases in war attention, and funds adjust positions ahead of and after peak war periods. Investor flows further reinforce these dynamics, with high-exposure funds attracting capital primarily during periods of heightened war concern.

Completion Date

2026

Semester

Spring

Committee Chair

Wang, Qinghai; Mullally, Kevin

Degree

Doctor of Philosophy (Ph.D.)

College

College of Business

Department

Finance

Format

PDF

Document Type

Dissertation

Identifier

DP0053200

Download

Share

COinS
 

Accessibility Statement

This item was created or digitized prior to April 24, 2027, or is a reproduction of legacy media created before that date. It is preserved in its original, unmodified state specifically for research, reference, or historical recordkeeping. In accordance with the ADA Title II Final Rule, the University Libraries provides accessible versions of archival materials upon request. To request an accommodation for this item, please submit an accessibility request form.