Market resilience in turbulent times: a proactive approach to predicting stock market responses during geopolitical tensions

Srivatsa Maddodi and Srinivasa Rao Kunte

Journal of Capital Markets Studies, 2024, vol. 8, issue 2, 173-194

Abstract: Purpose - The Indian stock market can be tricky when there's trouble in the world, like wars or big conflicts. It's like trying to read a secret message. We want to figure out what makes investors nervous or happy, because their feelings often affect how they buy and sell stocks. We're building a tool to make prediction that uses both numbers and people's opinions. Design/methodology/approach - Hybrid approach leverages Twitter sentiment, market data, volatility index (VIX) and momentum indicators like moving average convergence divergence (MACD) and relative strength index (RSI) to deliver accurate market insights for informed investment decisions during uncertainty. Findings - Our study reveals that geopolitical tensions' impact on stock markets is fleeting and confined to the short term. Capitalizing on this insight, we built a ground-breaking predictive model with an impressive 98.47% accuracy in forecasting stock market values during such events. Originality/value - To the best of the authors' knowledge, this model's originality lies in its focus on short-term impact, novel data fusion and high accuracy. Focus on short-term impact: Our model uniquely identifies and quantifies the fleeting effects of geopolitical tensions on market behavior, a previously under-researched area. Novel data fusion: Combining sentiment analysis with established market indicators like VIX and momentum offers a comprehensive and dynamic approach to predicting market movements during volatile periods. Advanced predictive accuracy: Achieving the prediction accuracy (98.47%) sets this model apart from existing solutions, making it a valuable tool for informed decision-making.

Keywords: Geopolitical tension; Stock market prediction; Sentiment analysis; Momentum indicator; LSTM (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jcmspp:jcms-12-2023-0049

DOI: 10.1108/JCMS-12-2023-0049

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