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Volatility transmission and spillover dynamics across financial markets: The role of geopolitical risk

Elsayed, A.H.; Helmi, M.H.

Volatility transmission and spillover dynamics across financial markets: The role of geopolitical risk Thumbnail


Authors

M.H. Helmi



Abstract

This paper examines the effect of geopolitical risk (GPR) on return and volatility dynamics in Middle East and North African (MENA) countries by using an ADCC-GARCH model and a spillover approach. Unlike previous studies, we include the GPR index to capture risk associated with wars, terrorist acts, and political tensions. Moreover, we test for both static and dynamic analysis using a rolling window. In brief, the findings highlight that GPR does not contribute to the return spillovers among MENA financial markets. However, the dynamic analysis provides evidence of the high level of responsiveness of the total spillover index to major political events (e.g., the Arab Spring uprising and political tension between Qatar and other Gulf Cooperation Council (GCC) countries). More interestingly, Qatar, Kingdom of Saudi Arabia (KSA), and the United Arab Emirates are identified as the main transmitters of return spillovers to the rest of the MENA markets. Overall, our results are essential in understanding the impact of the GPR on return spillover among MENA countries, and are of particular importance to policymakers, market regulators, portfolio managers and investors.

Citation

Elsayed, A., & Helmi, M. (2021). Volatility transmission and spillover dynamics across financial markets: The role of geopolitical risk. Annals of Operations Research, 305, 1-22. https://doi.org/10.1007/s10479-021-04081-5

Journal Article Type Article
Acceptance Date Apr 15, 2021
Online Publication Date May 3, 2021
Publication Date 2021-10
Deposit Date Apr 14, 2021
Publicly Available Date May 20, 2021
Journal Annals of Operations Research
Print ISSN 0254-5330
Electronic ISSN 1572-9338
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 305
Pages 1-22
DOI https://doi.org/10.1007/s10479-021-04081-5
Public URL https://durham-repository.worktribe.com/output/1244300

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Published Journal Article (Advance online version) (2.2 Mb)
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Publisher Licence URL
http://creativecommons.org/licenses/by/4.0/

Copyright Statement
Advance online version Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.





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