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Geopolitical Shocks and Financial Fragmentation: Impacts on Housing, Bond, and Stock Markets

Author

Listed:
  • Abdullah Alsadan
  • Hassan Alalmaee
  • Chokri Zehri
  • Wissem Ajili Ben Youssef

    (Department of Finance, College of Business Administration in Hawtat Bani Tamim, Prince Sattam bin Abdulaziz University, Saudi Arabia)

Abstract

Recent geopolitical tensions have intensified, disrupting global financial interconnectedness and contributing to increased market fragmentation. This study examines the adverse effects of rising geopolitical risk on asset prices, explicitly focusing on housing, bonds, and global stock market indexes. We employ an Autoregressive Distributed Lag (ARDL) model to analyze these risks' short-term and long-term impacts using panel data from 55 emerging markets and advanced economies from 1990 to 2023. Our findings underscore the persistent negative influence of geopolitical risks on housing, bond, and local stock market return indexes, with emerging market economies experiencing more pronounced effects than advanced economies. While the long- term threat posed by geopolitical risks is significant, their short-term impacts are generally milder unless exacerbated by extraordinary events or crises, as evidenced in the aftermath of the global financial crisis. Additionally, during periods of heightened geopolitical risk, global factors—such as rising uncertainty, oil price fluctuations, and stock market volatility— amplify the adverse effects on these markets. In contrast, domestic factors show minimal influence, underscoring the dominant role of global dynamics in shaping these outcomes.

Suggested Citation

  • Abdullah Alsadan & Hassan Alalmaee & Chokri Zehri & Wissem Ajili Ben Youssef, 2025. "Geopolitical Shocks and Financial Fragmentation: Impacts on Housing, Bond, and Stock Markets," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 15(1), pages 69-97.
  • Handle: RePEc:afj:journ3:v:15:y:2025:i:1:p:69-97
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-rdfin_v15_n1_a6
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    More about this item

    Keywords

    Geopolitical risk; Assets price; Bonds; Housing; Stock market index;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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