Acts, Threats, and Regime Shifts: U.S. Policy Uncertainty, Global Geopolitical Risk, and Korean Sectoral Stock Returns

This paper examines how U.S. economic policy uncertainty (EPU) and global geopolitical risk (GPR) are priced in Korean sectoral stock returns across political regimes. EPU is inherently country-specific, reflecting the U.S. policy environment that most directly shapes Korean trade and industrial conditions. GPR is global in nature, capturing supply-chain disruptions, commodity shocks, and security threats that transcend national borders. Using monthly data from January 2015 to January 2026 for five industries—semiconductors, secondary batteries, automobiles, steel, and energy and chemicals—we find clear sectoral heterogeneity. In Trump’s second term, semiconductors respond positively to geopolitical acts but negatively to threats; secondary batteries and energy and chemicals react more negatively to realized shocks; automobiles are closely tied to exchange-rate movements; and steel responds more to regime shifts and long-term interest rates. CAPM excess-return results confirm that these effects survive risk adjustment, reflecting industry-specific transmission channels rather than aggregate market risk.