Geopolitical risk, market sentiment, and energy dependence: Evidence from ASEAN stock markets

This study investigates how investor sentiment is reflected in market prices in ASEAN stock markets by incorporating geopolitical risk and energy import dependency as conditioning factors. Using monthly data from five ASEAN member countries, the study employs a cross-country panel regression model with fixed effects and interaction terms. The results show that geopolitical risk significantly moderates the transmission of investor sentiment into stock returns. This moderating effect is structurally asymmetric across economies with different levels of energy import dependency. Specifically, heightened geopolitical risk amplifies the impact of investor sentiment on asset pricing in net energy-exporting countries, while weakening the sentiment–return relationship in energy-import-dependent markets.