Laura Xiaolei Liu, Haibing Shu and K.C. John Wei
in: Journal of Financial Economics (2017)
In this paper Liu et al. investigate the impact of political uncertainty on asset prices. They identify an unexpected political event that occurred in China as an exogenous shock to political stability – the Bo Xilai Scandal on March, 14, 2012. Because this shock was unforeseen and increased political uncertainty immediately following its occurrence, it serves as an ideal setting to test the causal link between political instability and asset prices. For a better understanding of the situation Bo’s political scandal is described briefly within the paper.