Geopolitical risks, returns and volatility in emerging stock markets : evidence from a panel GARCH model
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Date
Authors
Bouras, Christos
Christou, Christina
Gupta, Rangan
Suleman, Tahir
Journal Title
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Publisher
Routledge
Abstract
In this article, we analyze the role of country-specific and global geopolitical risks (GPRs) on the returns and volatility of 18 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, unlikein 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.
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Keywords
Global geopolitical risk (GPR), Generalized autoregressive conditional heteroskedasticity (GARCH), Stock markets, Volatility, Returns, Panel GARCH, Geopolitical risks (GPRs), Emerging economies
Sustainable Development Goals
Citation
Christos Bouras, Christina Christou, Rangan Gupta & Tahir Suleman (2019) Geopolitical Risks, Returns, and Volatility in Emerging Stock Markets: Evidence from a Panel GARCH Model, Emerging Markets Finance and Trade, 55:8, 1841-1856, DOI: 10.1080/1540496X.2018.1507906.