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International Crises, Geopolitical Risks and the Hungarian Stock Market

Author

Listed:
  • Attila Zoltan Nagy

    (University of Pecs)

  • Sandor Erdos

    (University of Pecs)

Abstract

The authors examined the impacts of 108 international crises since 1991 on the share price index of the Budapest Stock Exchange with the event window and cross-sectional regression techniques, using the MSCI Emerging Markets Index as a basis of comparison. The results show that the average cumulative abnormal returns are, for the most part, negative, and statistically significant impacts can be observed primarily during a brief (0-10-trading day) period following the event. Market responses grew stronger after the 2000s, and the Hungarian stock market responds more sensitively to crises than developing markets do. Over the longer run, peaceful crises trigger more marked negative responses but these are temporary, while more severe crises have longer negative effects. In a regional breakdown, European events have proven to be the most sensitive. Cross-sectional regression analyses show that abnormal returns in the stock market are predominantly related to global volatility (VIX) and the BUX index's return environment preceding the event, while domestic macroeconomic fundamentals and confidence indicators only show a weaker and less certain relationship.

Suggested Citation

  • Attila Zoltan Nagy & Sandor Erdos, 2025. "International Crises, Geopolitical Risks and the Hungarian Stock Market," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 24(4), pages 118-145.
    • Handle: RePEc:mnb:finrev:v:24:y:2025:i:4:p:118-145
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    References listed on IDEAS

    as
    1. Hites Ahir & Nicholas Bloom & Davide Furceri, 2022. "The world uncertainty index," POID Working Papers 031, Centre for Economic Performance, LSE.
    2. Minh Phuoc-Bao Tran & Duc Hong Vo, 2023. "Market return spillover from the US to the Asia-Pacific Countries: The Role of Geopolitical Risk and the Information & Communication Technologies," PLOS ONE, Public Library of Science, vol. 18(12), pages 1-19, December.
    3. Salisu, Afees A. & Ogbonna, Ahamuefula E. & Lasisi, Lukman & Olaniran, Abeeb, 2022. "Geopolitical risk and stock market volatility in emerging markets: A GARCH – MIDAS approach," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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