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Information flow dynamics between geopolitical risk and major asset returns

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  • Zaghum Umar
  • Ahmed Bossman
  • Sun-Yong Choi
  • Xuan Vinh Vo

Abstract

We quantify information flows between geopolitical risk (GPR) and global financial assets such as equity, bonds, and commodities, with a focus on the Russian-Ukrainian conflict. We combine transfer entropy and the I-CEEMDAN framework to measure information flows at multi-term scales. Our empirical results indicate that (i) in the short term, crude oil and Russian equity show opposite responses to GPR; (ii) in the medium and long term, GPR information increases the risk in the financial market; and (iii) the efficiency of the financial asset markets can be confirmed on a long-term scale. These findings have important implications for market participants, such as investors, portfolio managers, and policymakers.

Suggested Citation

  • Zaghum Umar & Ahmed Bossman & Sun-Yong Choi & Xuan Vinh Vo, 2023. "Information flow dynamics between geopolitical risk and major asset returns," PLOS ONE, Public Library of Science, vol. 18(4), pages 1-14, April.
    • Handle: RePEc:plo:pone00:0284811
    DOI: 10.1371/journal.pone.0284811
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    References listed on IDEAS

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    1. AL-Musaylh, Mohanad S. & Deo, Ravinesh C. & Li, Yan & Adamowski, Jan F., 2018. "Two-phase particle swarm optimized-support vector regression hybrid model integrated with improved empirical mode decomposition with adaptive noise for multiple-horizon electricity demand forecasting," Applied Energy, Elsevier, vol. 217(C), pages 422-439.
    2. Naeem, Muhammad & Umar, Zaghum & Ahmed, Sheraz & Ferrouhi, El Mehdi, 2020. "Dynamic dependence between ETFs and crude oil prices by using EGARCH-Copula approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).
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    Cited by:

    1. Choi, Insu & Kim, Woo Chang, 2024. "A temporal information transfer network approach considering federal funds rate for an interpretable asset fluctuation prediction framework," International Review of Economics & Finance, Elsevier, vol. 96(PA).

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