The Effects of Positive and Negative Shocks in Country-Specific Geopolitical Risk On The Stock Market: Evidence From Asymetric Causality Analysis For BRICS-T Countries
DOI:
https://doi.org/10.63556/tisej.2026.1755Keywords:
Geopolitical Risk, Stock Market Index, Asymmetric Causality, Pozitive Shocks, Negative ShocksAbstract
Theory and literature show a significant link among stock markets and geopolitical risk. Therefore, the aim of the paper is to investigate the link among the stock market index and geopolitical risk utilising monthly data for the period 01.01.2019-01.04.2024 of the BRICS-T countries (Brazil, Russian, India, China, South Africa and Turkiye) by using time-varying bootstrap asymmetric panel causality test. In the first stage of the study, the LM of Breusch and Pagan (1980), the scaled LM of Pesaran (2004), and the bias-corrected and scaled LM tests developed by Baltagi vd. (2012) are applied to examine cross-sectional dependence of the variables. In the second stage, the asymmetric panel causality test, suggested by Hatemi-J (2012), employed by Yılancı and Aydın (2017) and based on the Konya (2006) panel causality test is applied to analyze the long-term corelation among the positive and negative cumulative totals of the variables. Empirical findings highlight the importance of geopolitical risk in determining stock prices in Brazil, Russia, India, China, South Africa, and Turkey. They also indicate that news about geopolitical risks in stock markets does not uniformly affect stock return dynamics and this effect varies over time. Therefore, these findings offer important recommendations for both policymakers and investors.
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