Geopolitical risk transmission dynamics to commodity, stock, and energy markets

In this study, we examined the transmission of geopolitical risk (GPR) to the stock, commodity, and energy markets. Using daily data from 1994 to 2022, we applied transfer entropy and time-frequency quantile vector autoregression-based connectedness approaches to examine the risk transmission mechanism. The results for the transfer entropy showed that wheat and corn returns are sensitive to GPR in the short term, while silver returns are highly reactive to GPR overall. The food commodity, energy, and stock market returns are significantly impacted by GPR during economic events. The static analysis of the connectedness approach showed that in the lower and mid-quantiles, stocks, energy commodities, and agricultural commodities transmit shocks toward GPR.