The Impact of Geopolitical Risk on Risk Contagion across Major Asset Classes

DOI

10.2991/978-94-6463-642-0_22How to use a DOI?

Keywords

geopolitical risk; risk contagion; stock; bond; foreign exchange; commodities

Abstract

In recent years, geopolitical risk has been rising. Numerous studies discuss the impact of geopolitical risk on individual asset classes or risk contagion in different asset classes through external shocks such as COVID-19 and financial crises. Motivated by these, this paper adopts the Granger causality test to explore how geopolitical risk can impact the pattern of risk contagion across asset classes including stock, bond, foreign exchange, and commodities from a global perspective. The outcome implies that geopolitical risk has little impact on the pattern of risk contagion across the asset classes. However, an intrinsic connection exists between asset classes, which is visually presented. First, the crude oil market is relatively independent, so systemic risk can be reduced for portfolios by taking crude oil futures. Second, the safe-haven effect may diminish because risk transmits from the bond market to the foreign exchange market and gold market. Third, the stock is the most important in transmitting contagion among the selected asset classes, so the stock market should be prioritized for monitoring and stimulation.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial 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 license and indicate if changes were made.

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TY  - CONF
AU  - Jingqian Cao
PY  - 2025
DA  - 2025/01/24
TI  - The Impact of Geopolitical Risk on Risk Contagion across Major Asset Classes
BT  - Proceedings of 2024 6th International Conference on Economic Management and Cultural Industry (ICEMCI 2024)
PB  - Atlantis Press
SP  - 220
EP  - 228
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-642-0_22
DO  - 10.2991/978-94-6463-642-0_22
ID  - Cao2025
ER  -