IDEAS home Printed from https://ideas.repec.org/a/kap/empiri/v52y2025i4d10.1007_s10663-025-09651-5.html
   My bibliography  Save this article

Is uncertainty in the European stock market resilient to geopolitical risk? A non-homogeneous regime-switching analysis

Author

Listed:
  • David Neto

    (Geneva Business School)

Abstract

This paper examines the role of geopolitical risk in increasing the likelihood of entering a high financial uncertainty regime in Europe. To this end, we employ two uncertainty indicators for the European stock market: the EURO STOXX 50 volatility index and an estimated index derived from a one-month-ahead forecast error variance model. We then estimate a Markov-switching model with time-varying transition probabilities for both indexes, where these probabilities depend on geopolitical risk factors. Our findings reveal a moderate and asymmetric impact of geopolitical risk on financial uncertainty. Specifically, while geopolitical risk appears to trigger spikes in uncertainty, it does not seem to contribute to its reduction.

Suggested Citation

  • David Neto, 2025. "Is uncertainty in the European stock market resilient to geopolitical risk? A non-homogeneous regime-switching analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 52(4), pages 651-666, November.
    • Handle: RePEc:kap:empiri:v:52:y:2025:i:4:d:10.1007_s10663-025-09651-5
    DOI: 10.1007/s10663-025-09651-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10663-025-09651-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10663-025-09651-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:empiri:v:52:y:2025:i:4:d:10.1007_s10663-025-09651-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.