Umar Z, Bossman A, Choi SY, Vo XV. Information flow dynamics between geopolitical risk and major asset returns.
PLoS One 2023;
18:e0284811. [PMID:
37098028 PMCID:
PMC10128946 DOI:
10.1371/journal.pone.0284811]
[Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [MESH Headings] [Grants] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 12/04/2022] [Accepted: 04/08/2023] [Indexed: 04/26/2023] Open
Abstract
We quantify information flows between geopolitical risk (GPR) and global financial assets such as equity, bonds, and commodities, with a focus on the Russian-Ukrainian conflict. We combine transfer entropy and the I-CEEMDAN framework to measure information flows at multi-term scales. Our empirical results indicate that (i) in the short term, crude oil and Russian equity show opposite responses to GPR; (ii) in the medium and long term, GPR information increases the risk in the financial market; and (iii) the efficiency of the financial asset markets can be confirmed on a long-term scale. These findings have important implications for market participants, such as investors, portfolio managers, and policymakers.
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