: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4674860
“Our paper contributes to the “everywhere” empirical asset pricing literature that studies
the economic determinants of risk affecting financial markets across asset classes. Using
political ratings of individual countries, we provide evidence of priced global political risk
across and within the equity, bond, and FX markets. Remarkably, the political risk factor
manifests itself in all the asset classes and proxies and can be meaningfully extracted
from any of those”
…
“Assets of countries with low political ratings earn higher
average returns because they load more on global political risk. The global multi-asset
P-factor carries a statistically significant risk premium of 4.44% per annum, with a tstatistic well above the critical threshold of three and a Sharpe ratio of 0.70.”
How to measure political risk:
