Stock market spillovers of global risks and hedging opportunities

Evangelos Salachas, Georgios Kouretas, Nikiforos T. Laopodis and Prodromos Vlamis

European Journal of Political Economy, 2024, vol. 83, issue C

Abstract: In this paper, we shed light on the linkage between several global risks and stock market returns. We use a dataset including G7, BRICS, MENA, and SAHEL group countries for a period of more than 30 years. We explore the spillover effects on global stock markets fueled by geopolitical, climatic, and global health risks. We provide evidence of a significant negative impact of geopolitical shocks on stock markets across countries. Further, we document that geopolitical shocks contribute to the spillover transmission of stock market volatility We also document that climate change and the global health crisis constitute risks that should be considered as a factor that heightens geopolitical risk. Finally, we identify possible strategies to hedge against geopolitical risk using a specific set of financial assets such as artwork.

Keywords: Geopolitical risk index; Stock returns; Climate risk; Panel VAR; GARCH models; Stock market hedging (search for similar items in EconPapers)
JEL-codes: F30 G11 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:83:y:2024:i:c:s0176268024000351

DOI: 10.1016/j.ejpoleco.2024.102533

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