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

Elsayed, A.H. and Helmi, H.M. (2021) 'Volatility transmission and spillover dynamics across financial markets: The role of geopolitical risk.', Annals of operations research., 305 . pp. 1-22.


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.

Item Type:Article
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Publisher statement: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
Date accepted:15 April 2021
Date deposited:15 April 2021
Date of first online publication:03 May 2021
Date first made open access:20 May 2021

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