Title
Geopolitical Risk and Stock Market Volatility: Evidence from GARCH-Based Asymmetric Models
Authors
Abstract
This study investigates the impact of geopolitical risk on stock market volatility using high-frequency data and advanced econometric techniques. Employing daily data from January 2010 to December 2025, the analysis applies GARCH, EGARCH, and TGARCH models to capture both symmetric and asymmetric volatility dynamics. The results provide strong evidence that geopolitical risk significantly increases stock market volatility, indicating that heightened uncertainty associated with geopolitical events leads to greater market instability. The findings further reveal substantial volatility persistence, suggesting that shocks induced by geopolitical events have long-lasting effects on financial markets. Importantly, the asymmetric models indicate that negative shocks exert a stronger impact on volatility than positive shocks, highlighting the role of behavioral factors such as investor fear and panic. Robustness checks confirm the stability of the results across different model specifications and sample periods, with the impact of geopolitical risk being more pronounced during crisis periods. This study contributes to the literature by providing a comprehensive and dynamic analysis of geopolitical risk and volatility using high-frequency data and asymmetric models. The findings offer important implications for policymakers and investors, emphasizing the need to incorporate geopolitical risk into financial decision-making and risk management strategies.
Keywords
Geopolitical Risk, Stock Market Volatility, GARCH Models, Asymmetric Volatility, Financial Markets, Uncertainty
JEL Codes
C58, C22, G12, G15, G17
How to Cite
Bhatty, K., & Raheem, A. (2025). Geopolitical Risk and Stock Market Volatility: Evidence from GARCH-Based Asymmetric Models. The International Journal of Finance, 37(1), 62–73.