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Impact of Geopolitical Risk on G7 Financial Markets: A Comparative Wavelet Analysis between 2014 and 2022

Author

Listed:
  • Oana Panazan

    (Department of Engineering and Industrial Management, Transilvania University of Brasov, Eroilor Street 29, 500036 Brasov, Romania)

  • Catalin Gheorghe

    (Department of Engineering and Industrial Management, Transilvania University of Brasov, Eroilor Street 29, 500036 Brasov, Romania)

Abstract

This study investigates co-movements between the GPR generated by the Crimean Peninsula’s annexation in 2014, the Russia–Ukraine war in 2022, and the volatility of stock markets in the G7 states. Using wavelet analysis, concentrated co-movement was found for all indices in both periods. Contrary to the general perception, we find that the G7 financial market response in 2014 was robust. Using a time-varying parameter vector autoregression (TVP-VAR) test, we found a larger reaction in the amplitude of the G7 financial markets in 2022 than in 2014. The financial markets in France, Germany, and the UK showed a similar reaction in 2022. We have identified some common aspects, even if the political and military contexts of the two studied events were completely different. Our findings offer new and interesting implications for understanding how geopolitical risk affects financial assets for market participants with multiple investment horizons and strategies.

Suggested Citation

  • Oana Panazan & Catalin Gheorghe, 2024. "Impact of Geopolitical Risk on G7 Financial Markets: A Comparative Wavelet Analysis between 2014 and 2022," Mathematics, MDPI, vol. 12(3), pages 1-22, January.
    • Handle: RePEc:gam:jmathe:v:12:y:2024:i:3:p:370-:d:1325296
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    References listed on IDEAS

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    Cited by:

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    2. 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).
    3. Bei, Honghan & Wang, Qian & Yan, Xiaoxiao & Geng, Xinpeng, 2025. "Multiscale extreme risk spillover between shipping and commodity markets: An analysis based on GARCH-Copula-CoVaR," Energy Economics, Elsevier, vol. 148(C).
    4. Animesh Bhattacharjee & Jayeeta Debnath Munshi & Joy Das, 2026. "From Manila to Beijing: Geopolitical Risk, Macroeconomics, and the Indian Stock Market in a Volatile Region," Metamorphosis: A Journal of Management Research, , vol. 25(1), pages 79-86, April.

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