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Geopolitical Risks and the Oil-Stock Nexus Over 1899-2016

Author

Listed:
  • Nikolaos Antonakakis

    () (Webster Vienna Private University and University of Portsmouth)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria, South Africa)

  • Christos Kollias

    (University of Thessaly)

  • Stephanos Papadamou

    (University of Thessaly)

Abstract

Markets are invariably influenced and affected not only by the usual array of economic and financial factors but also by uncertainty inducing shocks. Using monthly stock and oil real returns data that spans over a century, this study takes a long historical perspective on whether the time-varying stock–oil covariance, their returns and their variances are affected by geopolitical risk as encapsulated and quantified by a recently developed index (Caldara and Iacoviello, 2016). To address the issue, a VAR(p)-BEKK-GARCH(1,1) model is used. The results reported herein indicate that the geopolitical risk index introduced in the estimations triggers a negative effect mainly in case of oil returns and volatility and to a smaller degree reduces the covariance between the two markets with a time lag.

Suggested Citation

  • Nikolaos Antonakakis & Rangan Gupta & Christos Kollias & Stephanos Papadamou, 2017. "Geopolitical Risks and the Oil-Stock Nexus Over 1899-2016," Working Papers 201702, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201702
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    Cited by:

    1. repec:eee:riibaf:v:47:y:2019:i:c:p:511-518 is not listed on IDEAS
    2. Riza Demirer & Rangan Gupta & Qiang Ji & Aviral Kumar Tiwari, 2018. "Geopolitical Risks and the Predictability of Regional Oil Returns and Volatility," Working Papers 201860, University of Pretoria, Department of Economics.
    3. Jamal Bouoiyour & Refk Selmi, 2019. "The Changing Geopolitics in the Arab World: Implications of the 2017 Gulf Crisis for Business," Papers 1903.08076, arXiv.org.
    4. Aviral Kumar Tiwari & Goodness C. Aye & Rangan Gupta & Konstantinos Gkillas, 2019. "Gold-Oil Dependence Dynamics and the Role of Geopolitical Risks: Evidence from a Markov-Switching Time-Varying Copula Model," Working Papers 201918, University of Pretoria, Department of Economics.
    5. Jamal Bouoiyour & Refk Selmi, 2019. "Arab Geopolitics in Turmoil: Implications Of Qatar-Gulf Crisis for Business," Working Papers 1337, Economic Research Forum, revised 21 Aug 2019.
    6. repec:eee:eneeco:v:76:y:2018:i:c:p:584-593 is not listed on IDEAS

    More about this item

    Keywords

    Geopolitical Risk; Stock and Oil markets; BEKK-GARCH models;

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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