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Dynamic hedging strategies for U.S. investors in international stock ETFs following geopolitical conflicts

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  • Han, SeungOh

Abstract

This study examines risk transmission among developed and emerging market ETFs after the Russian and Hamas invasions. Our findings reveal a wave-like pattern in interconnectedness among international ETFs, characterized by an initial decrease, subsequent rebound, and decline. Post-invasion, Germany and France emerge as primary net transmitters of volatility, while China, UAE, and Saudi Arabia act as major net receivers. Overall, China and UAE become economical hedges, while Germany and France serve as optimal risk reducers. For the U.S. ETF, China offers cost-effective hedging, while Canada effectively reduces its risks. South Africa helps the China ETF efficiently mitigate risks.

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  • Han, SeungOh, 2025. "Dynamic hedging strategies for U.S. investors in international stock ETFs following geopolitical conflicts," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324014545
    DOI: 10.1016/j.frl.2024.106425
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    More about this item

    Keywords

    Geopolitical conflicts; Russia–Ukraine conflict; Israel–Hamas conflict; International ETFs; Risk spillover; Hedging strategies;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East

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