Abstract: Geopolitical risk has become a salient driver of equity markets, yet evidence on how its effects differ between emerging and developed economies is fragmented across datasets, models, and episodes. This paper offers a narrative, theory-guided synthesis of recent macro-finance research on asymmetric equity market responses to geopolitical risk, organised around the Caldara–Iacoviello Geopolitical Risk (GPR) index and its Threat and Act components. Drawing on multi-country event studies, local-projection estimates, GARCH-MIDAS variance models, time-varying spillover indices, wavelet coherence, and quantile-on-quantile approaches, the review distils a set....
Key Words: Geopolitics; Risk; Equities; Volatility; Spillovers; Equity; Asymmetry; Emerging; Developed; Transmission
[1].
Adrian, T., Etula, E., & Muir, T. (2019). Financial intermediaries and the cross-section of asset returns. Journal of Finance, 74(1), 33–70. https://doi.org/10.1111/jofi.12709
[2].
Aguiar, M., & Gopinath, G. (2005). Fire‐sale foreign direct investment and liquidity crises. Review of Economics and Statistics, 87(3), 439–452. https://doi.org/10.1162/0034653053970249
[3].
Agyei, S. K., Mensah, E., & Owusu, K. (2023). Emerging market equities’ response to geopolitical risk: Time–frequency evidence from the Russian–Ukrainian conflict era. Heliyon, 9(2), e13319. https://doi.org/10.1016/j.heliyon.2023.e13319
[4].
Ali, S. R. M., Anik, K. I., Hasan, M. N., & Kamal, M. R. (2023). Geopolitical threats, equity returns, and optimal hedging. International Review of Financial Analysis, 90, Article 102835. https://doi.org/10.1016/j.irfa.2023.102835
