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Geopolitical risks and airlines stock return — Implications to the financial stability of European airlines

Author

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  • Cai, Yifei
  • Fu, Xiaowen
  • Zhang, Yahua

Abstract

This study utilizes a time-varying Granger causality test to investigate the causal relationship between geopolitical risks and stock return of main carriers in Europe. While the overall estimations from the entire dataset reveal limited evidence supporting causality between these variables, the rolling-window bootstrapping Granger causality test presents a dynamic pattern that a time-varying causality running from geopolitical risks to airline stock returns. However, within this fluctuating analytical framework, airline stock returns fail to reliably predict geopolitical risks. Finally, we offer significant policy implications to the financial stability of European airlines.

Suggested Citation

  • Cai, Yifei & Fu, Xiaowen & Zhang, Yahua, 2025. "Geopolitical risks and airlines stock return — Implications to the financial stability of European airlines," Transport Policy, Elsevier, vol. 170(C), pages 51-57.
    • Handle: RePEc:eee:trapol:v:170:y:2025:i:c:p:51-57
    DOI: 10.1016/j.tranpol.2025.05.001
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    More about this item

    Keywords

    Airlines stock returns; US–China tensions; Time-varying granger causality test; Rolling-window technique;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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