Methodology
How PRR measures firm-level political risk transmission, what it claims, and what it does not.
What PRR measures
PRR measures whether political-risk events have historically been associated with firm-specific value responses. It connects sanctions, trade policy, conflict, regulation, and other political shocks to observable outcomes at the individual firm level — not at the country or sector level. In the current implementation, firm value is measured through market-implied abnormal return response. The same framework can test other firm-level outcomes such as revenue, margins, CDS spreads, bond spreads, insurance claims, project delays, cost of capital, or contract awards.
Current dependent variable
Today, PRR uses market-implied firm value response as its primary observable. This means public equity price data, benchmark-adjusted abnormal returns measured in event windows around political-risk events, with mechanism-specific event groups tested independently at the firm level. The relationship between a firm's exposure to a political-risk mechanism and its observed value response around events of that type is the core unit of evidence.
Public equity price data
Firm value is observed through publicly traded equity prices, providing a high-frequency, comparable signal across firms, sectors, and geographies.
Benchmark-adjusted abnormal returns
Each firm's response is measured relative to its benchmark, isolating the event-specific component from broader market movement.
Event-window analysis
Firm value response is measured in defined windows around political-risk events, with mechanism-specific event groups tested independently.
We ask whether firms with higher exposure to a political-risk mechanism tend to show different value responses around events of that type.
Why market-implied firm value first
Available across many firms
Public equity data covers hundreds of firms across listing markets, enabling cross-sectional comparison at scale.
Updated frequently
Daily price data allows event-level testing with precise timing — unlike quarterly financials or annual reports.
Comparable across sectors and countries
The same measurement framework applies to a South African coal exporter and a U.S. utility, enabling direct comparison on the same evidence surface.
Reflects forward expectations
Market-implied firm value reflects investor expectations about future cash flows, risk, financing conditions, and optionality — not just historical accounting.
Enables event-level testing at scale
High-frequency, standardized data allows PRR to test firm responses across dozens of events per mechanism, building statistical evidence that lower-frequency variables cannot support.
What PRR does not claim
Not causal proof
PRR identifies observed associations between political events and firm value responses. Business-model explanations are plausible interpretations, not proven causal chains.
Not a guarantee of future performance
Historical transmission patterns inform diligence and scenario analysis. They do not predict how any firm will respond to future events.
Not a single country-risk score
PRR operates at the firm level rather than aggregating to country-level scores. Firms in the same country can show opposite responses to the same event class.
Not a replacement for diligence
PRR is a structured evidence layer that informs analysis. It does not replace sector expertise, on-the-ground knowledge, or professional judgment.
Not limited to equities forever
Market-implied firm value is the first observable layer. The framework is designed to accommodate other firm-level outcome variables as data becomes available.
Other firm-level outcomes PRR can test
Equity-based firm value is the first observable layer. PRR's architecture is outcome-agnostic: the same event and firm exposure framework can be applied to any measurable firm-level outcome.
PRR starts with market-implied firm value because it is observable and comparable, but the framework is not limited to public equity data. It can test any firm-level outcome that can be measured consistently around political-risk events.
How events enter PRR
PRR is not a static database. It is a political-risk evidence engine that updates as new events move from headline, to curated event, to measured firm-value response. New events enter PRR as candidates under curation. As they mature, PRR tests firm-value response across multiple time windows, allowing the system to learn whether a political-risk channel transmits immediately, slowly, temporarily, or persistently.
PRR is not a static database. It is a political-risk evidence engine that updates as new events move from headline, to curated event, to measured firm-value response — learning whether transmission is immediate, slow, temporary, or persistent.
Why private data is not a blocker
PRR learns from public firm-event observations first. Each observation links a public political-risk event to an observed firm-value response over defined time windows. This creates a reusable evidence base that can support private-company analysis later through exposure mapping, peer cohorts, and customer-specific enrichment. AI builders, insurers, and deal teams can start getting value without waiting for a private-data partnership.