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War discourse predicts stock market volatility: A century of evidence

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  • Zhou, Zhiping
  • Wang, Kai

Abstract

This study investigates the impact of war-related risk on stock market volatility using a war discourse index. Drawing on a century of data, we show that the index significantly predicts U.S. stock market volatility up to 12 months ahead. This predictive power remains robust after accounting for macroeconomic conditions, market variables, and geopolitical risk. Furthermore, forecasts yield economically meaningful utility gains over benchmarks. Our findings offer investors practical tools for forecasting volatility and managing portfolios while equipping policymakers with evidence-based strategies for stabilizing markets. The results reinforce the importance of monitoring war-related risks in financial decision-making amid rising global tensions.

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  • Zhou, Zhiping & Wang, Kai, 2025. "War discourse predicts stock market volatility: A century of evidence," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008268
    DOI: 10.1016/j.frl.2025.107567
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    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G4 - Financial Economics - - Behavioral Finance

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