Izvorni znanstveni članak
https://doi.org/10.5559/di.35.2.06
Effects of Geopolitical Risk on Short- and Long-Term Volatility in Emerging Stock Markets
Josip Arnerić
orcid.org/0000-0002-2901-2609
; Sveučilište u Zagrebu, Ekonomski fakultet, Zagreb, Hrvatska
*
* Dopisni autor.
Sažetak
This paper examines the role of geopolitical risk (GPR) as an
exogenous variable in explaining volatility in emerging
Central European stock markets, aiming to assess whether
differences in investors' perceptions of global geopolitical risk
are reflected in heterogeneous effects across markets that
are shallower and less liquid, and therefore more sensitive to
wars, international conflicts, and political tensions. To
address the limitations of standard single-frequency GARCH
models, the study employs a GARCH-MIDAS framework that
separates short-run volatility from long-run volatility, the
latter being associated with geopolitical shocks observed at
lower frequencies. Complementarily, a GARCH-X specification
is used to examine the contemporaneous impact of
daily GPR on short-term volatility. The results indicate that the
short-run effect of geopolitical risk is limited or statistically
insignificant, while monthly GPR is a strong driver of longrun
volatility in the Polish, Czech, and Romanian markets,
with weaker intensity in the Croatian and Bulgarian markets,
and an opposite effect identified in the Hungarian market.
The findings have important implications for institutional
investors in improving risk management across different
investment horizons, as well as for policymakers in designing
timely responses to mitigate the impact of geopolitical shocks
on these markets.
Ključne riječi
GARCH-MIDAS; GARCH-X; geopolitical risk; emerging stock markets; volatility
Hrčak ID:
350961
URI
Datum izdavanja:
1.9.2026.
Posjeta: 0 *