The interplay among corporate bonds, geopolitical risks, equity market, and economic uncertainties

Saad Alshammari, Kostas Andriosopoulos, Olfa Kaabia, Kamel Si Mohamed and Christian Urom

International Review of Financial Analysis, 2024, vol. 95, issue PA

Abstract: This study examines the dynamic interconnectedness and dependence between the USA’s corporate bond market (CMD) and economic and equity market uncertainties, as well as geopolitical risk. Using quantile Vector Autoregressive (QVAR) and Wavelet Local Multiple Correlation (WLMC) techniques, we place particular emphasis on the periods corresponding to the Russian–Ukrainian war and the COVID-19 pandemic. We find significantly higher interconnectedness, particularly at the upper quantile and large scale, during these two events, lending support to the use of asymmetric models. Additionally, our findings reveal that the impact is more robust when uncertainty increases compared to periods of decreased uncertainty. These results carry vital implications for policymakers and macro-prudential authorities, emphasizing the necessity to consider a changing macroeconomic environment and to reduce dependence on Russian energy sources to navigate a complex and evolving financial landscape.

Keywords: Corporate bonds; Geopolitical risks; Market uncertainties; Quantile VAR; WLMC (search for similar items in EconPapers)
JEL-codes: G1 G10 G15 H56 Q43 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pa:s1057521924002825

DOI: 10.1016/j.irfa.2024.103350

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