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Disentangling geopolitical risks: A quantile approach to geopolitical risk indices’ impacts on stock markets

Author

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  • Marangoz, Cumali
  • Gerekan, Bekir
  • Yılmaz, Erdal
  • Bulut, Emre

Abstract

This study investigates the impact of Global Geopolitical Risk (GPR), along with the GPR indices of Russia and the US, on the returns of the world's nine largest stock markets using the quantile connectedness methodology and unfolds the heterogenous effects of geopolitical risks on market performance from 1992 to 2024. Our study provides a more comprehensive examination of geopolitical risk transmission across markets by incorporating country-specific GPR indices. Our findings show that regional proximity amplifies the effects of GPR. European indices are highly responsive to Russian GPR, North American markets to US GPR, and Asian markets to global trends.

Suggested Citation

  • Marangoz, Cumali & Gerekan, Bekir & Yılmaz, Erdal & Bulut, Emre, 2025. "Disentangling geopolitical risks: A quantile approach to geopolitical risk indices’ impacts on stock markets," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325003769
    DOI: 10.1016/j.frl.2025.107113
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    Keywords

    Stock exchange indices; Connectedness; Geopolitical risk indices; Quantile vector autoregression (QVAR); Financial performance;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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