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The impact of geopolitical risk on higher-order moment risk spillovers in global energy markets

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  • Xie, Qichang
  • Bi, Yanhao
  • Xi, Yiyu
  • Xu, Xin

Abstract

The impact of geopolitical risk on financial markets has been well-documented, yet there is limited research on higher-order moment risk spillovers in energy markets. This paper employs an extended joint TVP-VAR spillover index model to investigate the risk spillover effects and their dynamic evolution across global energy markets under the moments of volatility, skewness, and kurtosis. By constructing a GARCH-MIDAS-GPR model, we examine the impact of geopolitical risks on the higher-order moment risk connectivity of the energy system. Our findings reveal that: (1) energy markets across countries exhibit strong interconnections in terms of volatility, skewness, and kurtosis, while the spillover effects of skewness and kurtosis are lower than those of conditional variance; (2) higher-order moment risk spillovers exhibit significant time-varying characteristics, tending to substantially increase during periods of geopolitical crises; (3) the major countries in Europe and America act as net exporters of risk at various moment levels, and the Asia-Pacific countries are primarily net importers of risk; (4) the higher-order moment risk spillover indices significantly improve the predictive capabilities for energy market risks; (5) geopolitical risks are a significant factor exacerbating the spillover of higher-order moment risks in energy markets, with an even greater impact on risk spillover at the level of skewness. Our research contributes to a deeper understanding of the risk spillover effects of geopolitical risks on energy markets under higher-order moments, which is of great significance for investors to optimize their portfolios and for regulatory authorities to establish regulatory systems.

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  • Xie, Qichang & Bi, Yanhao & Xi, Yiyu & Xu, Xin, 2025. "The impact of geopolitical risk on higher-order moment risk spillovers in global energy markets," Energy Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:eneeco:v:144:y:2025:i:c:s014098832500115x
    DOI: 10.1016/j.eneco.2025.108292
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    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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