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On the relationship between geopolitical risks and euro area sovereign bond yields

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  • Papavassiliou, Vassilios G.

Abstract

This paper is the first to investigate the relationship between euro area sovereign bond yields and geopolitical risks. The sample period extends from January 2016 to October 2024 and includes all major recent geopolitical events. Using standard linear regression models, the results indicate that geopolitical risks are strongly positively associated with sovereign bond yields, even after controlling for economic factors that determine bond yields. This finding is consistent with the view that markets anticipate an extra risk premium to compensate bond holders for increased geopolitical risks.

Suggested Citation

  • Papavassiliou, Vassilios G., 2025. "On the relationship between geopolitical risks and euro area sovereign bond yields," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001424
    DOI: 10.1016/j.frl.2025.106877
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    References listed on IDEAS

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    More about this item

    Keywords

    Geopolitical risks; Sovereign bond yields; Euro area sovereign bond markets; Bond risk premium; Russia–Ukraine war; Israel–Hamas war;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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