Scholarlink

<p>This paper examines the role of geopolitical risk in increasing the likelihood of entering a high financial uncertainty regime in Europe. To this end, we employ two uncertainty indicators for the European stock market: the EURO STOXX 50 volatility index and an estimated index derived from a one-month-ahead forecast error variance model. We then estimate a Markov-switching model with time-varying transition probabilities for both indexes, where these probabilities depend on geopolitical risk factors. Our findings reveal a moderate and asymmetric impact of geopolitical risk on financial uncertainty. Specifically, while geopolitical risk appears to trigger spikes in uncertainty, it does not seem to contribute to its reduction.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Is uncertainty in the European stock market resilient to geopolitical risk? A non-homogeneous regime-switching analysis

  • 期刊论文

  • 发表日期：

    2025年6月1日

查看全文
  • David Neto

摘要

This paper examines the role of geopolitical risk in increasing the likelihood of entering a high financial uncertainty regime in Europe. To this end, we employ two uncertainty indicators for the European stock market: the EURO STOXX 50 volatility index and an estimated index derived from a one-month-ahead forecast error variance model. We then estimate a Markov-switching model with time-varying transition probabilities for both indexes, where these probabilities depend on geopolitical risk factors. Our findings reveal a moderate and asymmetric impact of geopolitical risk on financial uncertainty. Specifically, while geopolitical risk appears to trigger spikes in uncertainty, it does not seem to contribute to its reduction.