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Net pairwise directional connectedness (NPDC). Note: The figure presents the net pairwise connectedness series obtained from the TVP-VAR model with lag length of order one (BIC) and a 20-step-ahead generalized forecast error variance decomposition. The black shaded area represents the symmetric pairwise directional connectedness, while the green and red lines plot the positive and negative pairwise directional connectedness estimates, respectively. Positive (negative) values indicate the variable as a net volatility transmitter (receiver). (For interpretation of the references to color in this figure legend, the reader is referred to the Web version of this article.)
Source publication
The goal of this study is to examine the role of geopolitical risks as a driver of stock market returns in the context of the energy-stock market nexus with a particular emphasis on the intermediary role of energy supply for Turkiye. Our findings confirm the role of GPRs as a net transmitter of shocks to the stock market. However, while electricity...
Context in source publication
Context 1
... downturns, while it is a net transmitter during bull market states, providing support to the evidence by Da et al. (2017) and Bonato et al. (2018) that measures of energy utilization can play a predictive role over the direction of the aggregate economy although our findings suggest that such a predictive role would depend on the market state. Fig. 4 presents the net pairwise connectedness series with the black shaded area representing the symmetric pairwise directional connectedness, while the green and red lines plot the positive and negative pairwise directional connectedness estimates, respectively. The net connectedness estimates in the figure capture the bivariate ...
Citations
... claimed that oil prices are an incomplete proxy for energy prices and thus developed the energy uncertainty index. On the other hand, geopolitical risks (GPRs) are important factors in energy markets and act as both transmitters and absorbers of shocks in stock market development (Böyükaslan et al., 2024;Gürsoy, 2021). In addition to volatility in both energy prices and geo-political risk, they determine how an investor acts. ...
... The developed by Different from other studies that emphasise the direct relationship between geopolitical risks, energy price uncertainty or macroeconomic uncertainty on financial markets, this study takes a different path and focuses on oil price uncertainty as an important transmission mechanism in the relationship between BRICS stock markets and global energy dynamics. By adopting advanced econometric techniques such as Fourier Granger and Fourier Toda-Yamamoto causality tests, this study shows how to confidently capture linear and non-linear causal relationships that have often been ignored by previous researchers (Elder and Serletis, 2010;Böyükaslan et al., 2024). Thus, this approach extends its examination from oil price uncertainty to the volatility that pervades equity markets in some emerging economies, possibly providing a more sophisticated understanding of how regional markets respond to changes in external energy. ...
The aim of this study is to explain the relationship between Oil Price Uncertainty (OPU) and the stock markets of BRICS countries. For this purpose, monthly OPU Index and stock market data of BRICS countries in the period between August 1997 and December 2019 are used. The results are as follows: (i) FARDL, ADL and RALS-ADL test results indicated that OPU is cointegrated with all country markets except JSE Top 50. (ii) Fourier Granger and Fourier Toda-Yamamoto causality test results revealed that there is a unidirectional causality from OPU to IBOVESPA and RTS, while there is no causality relationship between OPU and other stock markets. (iii) There is a causality in variance from BRICS stock markets to OPU and volatility spillover from OPU to IBOVESPA, BSE 30 and JSE Top 50. In addition, the study provides insightful implications for market stakeholders.
... Global or regional geopolitical events affect neighboring markets because of the contagion effect. Research, which intensified after the war in Ukraine, reveals that GPR events affect stocks (Raheem & Le Roux, 2023), commodities (Gong & Xu, 2022), gold (Adeosun et al., 2024), oil (Ahmed et al., 2023;He & Sun, 2024), energy (Böyükaslan et al., 2024;Mamman et al., 2024;Wang et al., 2024), and cryptocurrencies (Aysan et al., 2019;Singh et al., 2022). GPR's emergence caused investors to migrate to heaven assets (Elsayed et al., 2022) for protection against risk. ...
This study examined the stock market volatility of the member states of the South Asian Association for Regional Cooperation (SAARC) and geopolitical risk (GPR). The analysis period covered January 2014 to March 2024, and the time–frequency wavelet method was used to process the data. The time-varying parameter vector autoregression and spatial autoregressive models helped determine the dynamic connectedness of volatility in the analyzed states. The findings revealed similar stock market connections in Bangladesh and India. In addition, a comparative analysis of stocks in India and Pakistan led to the identification of common elements. The connection between geopolitical concerns and Sri Lankan stocks was the strongest and increased in intensity after 2019. GPR and Nepal’s stock market maintained a continuous but low-intensity relationship. The dynamic connectedness between member states’ stock markets was limited during the review period. The study results could encourage SAARC governments to bridge their political differences to ensure that South Asia becomes a strong partner in the global economy. Equally, our results can benefit investors, financial institutions, regulatory authorities, and governments.
... • Turkey: Dealing with internal and external conflicts, including tensions with Kurdish groups and involvement in regional disputes. Böyükaslan et al. (2024): Turkey "has had its fair share of geopolitical risks due to its geographical location which makes it particularly prone to GPRs." According to Afşar et al. (2022), "Turkey is a transcontinental country connecting Western Asia and Southeastern Europe. ...
... Turkey has faced continuous problems near its borders due to its location." The Turkish stock market is sensitive to geopolitical tensions (Aksoy, 2014, Hoque and Zaidi, 2020, Böyükaslan et al., 2024. ...
This study analyzes the effects of local and global geopolitical risks (GPR) on real equity returns. Using a panel and country-specific local projections (LP) model, we analyze the impact of local and global GPR shocks, where the latter is further decomposed into aggregate risks, threats, and actions. Our findings reveal that both local and global GPR shocks negatively impact real equity returns at the onset, with global shocks generally exerting a stronger influence. While threats tend to have a more pronounced negative effect compared to actions, we observe heterogeneous responses on financial markets to different types of geopolitical risks, we find that actions have greater potency in economies exposed to higher levels of local GPR due to recurring conflicts and geopolitical tensions.
