Geopolitical Risks, Returns and Volatility in Emerging Stock Markets: Evidence from a Panel GARCH Model

Christos Bouras (), Christina Christou (), Rangan Gupta and Tahir Suleman ()
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Christos Bouras: Department of Banking and Financial Management, University of Piraeus, Piraeus, Greece.
Christina Christou: School of Economics and Management, Open University of Cyprus, Latsia, Cyprus

No 201777, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we analyze the role of country-specific and global geopolitical risks (GPRs) on the returns and volatility of eighteen emerging market economies over the monthly period of 1998:11 to 2017:06. For our purpose, we use a panel Generalized Autoregressive Conditional Heteroskedasticity (GARCH) approach, which offers substantial efficiency gains in estimating the conditional variance and covariance processes by accounting for interdependencies and heterogeneity across economies, unlike in a time series-based GARCH model. We find that, while country-specific GPRs do not have an impact on stock returns, and the positive effect on equity market volatility is statistically weak. But when we consider a broad measure of global GPR, though there is still no significant effect on returns, the impact on volatility is both economically and statistically stronger than that obtained under the country-specific GPRs, thus highlighting the dominance of global rather than domestic shocks.

Keywords: Geopolitical Risks; Stock Markets; Returns and Volatility; Emerging Economies; Panel GARCH (search for similar items in EconPapers)
JEL-codes: C33 G15 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2017-11
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Citations: View citations in EconPapers (7)

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Journal Article: Geopolitical Risks, Returns, and Volatility in Emerging Stock Markets: Evidence from a Panel GARCH Model (2020)
Journal Article: Geopolitical Risks, Returns, and Volatility in Emerging Stock Markets: Evidence from a Panel GARCH Model (2019)
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