What the study found
Geopolitical risk was linked to stock market returns in different ways depending on market conditions. The study reports a negative influence during bullish regimes and a positive association during bearish regimes, with stronger effects in emerging and commodity-rich markets.
Why the authors say this matters
The authors conclude that it is important to distinguish between geopolitical acts and geopolitical threats when considering risk management, and to identify the market regime correctly. The study suggests that these distinctions matter for understanding how geopolitical risk is transmitted to stock markets.
What the researchers tested
The researchers examined the impact of three geopolitical risk measures—aggregate geopolitical risk, geopolitical acts, and geopolitical threats—on 40 global stock market indexes from developed and emerging markets over 20 years. They used simultaneous quantile regression and a two-stage quantile-on-quantile regression framework to study risk transmission across the conditional distribution of stock returns.
What worked and what didn't
The empirical results showed a regime-dependent reversal: geopolitical risk was negative in bullish markets and positive in bearish markets. For the United States stock market, geopolitical threats were reported as a persistent negative factor in normal and bullish regimes, while geopolitical acts were described as a tail-risk catalyst that worsened losses during severe market crashes.
What to keep in mind
The abstract says the results were robust to an alternative specification of returns, but it does not describe further limitations. The findings are based on the sample and methods reported in the abstract, so the available summary does not provide additional scope constraints.
Key points
- The study found a regime-dependent reversal in how geopolitical risk relates to stock returns.
- Geopolitical risk was negative in bullish market conditions and positive in bearish conditions.
- The effects were more pronounced in emerging and commodity-rich markets.
- In the U.S. analysis, geopolitical threats were a persistent negative factor in normal and bullish regimes.
- Geopolitical acts were described as a tail-risk catalyst during severe market crashes.
Disclosure
- Research title:
- Geopolitical risk affects stock markets differently by regime
- Publication date:
- 2026-04-02
- OpenAlex record:
- View
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