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China’s geopolitical risk and international financial markets: evidence from Canada

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  • Vikkram Singh
  • Eduardo Dacillo Roca

Abstract

Given the high level of economic and financial globalization, geopolitical tensions can disrupt international trade and negatively influence financial markets. China, a global economic power, has been at the center stage of recent geopolitical tensions with widespread economic implications. We empirically investigate the effect of China’s geopolitical risk on Canada’s equity markets. The results show a persistent impact on market returns and volatility, most prominently on the resources and energy sectors. Even though China plays a smaller role than the US as a trading partner, China’s geopolitical risk significantly affects the Canadian stock market and its component sectors. Our results, therefore, support the need for a constructive approach toward alleviating global geopolitical tensions and for the development of geopolitical risk hedging strategies such as insurance and investment in commodities at the country and investor levels.

Suggested Citation

  • Vikkram Singh & Eduardo Dacillo Roca, 2022. "China’s geopolitical risk and international financial markets: evidence from Canada," Applied Economics, Taylor & Francis Journals, vol. 54(34), pages 3953-3971, July.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:34:p:3953-3971
    DOI: 10.1080/00036846.2021.2019185
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    Cited by:

    1. Hu, Zinan & Borjigin, Sumuya, 2024. "The amplifying role of geopolitical Risks, economic policy Uncertainty, and climate risks on Energy-Stock market volatility spillover across economic cycles," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    2. Shaobin, Guo & Ahmad, Khalil & Khan, Naqib Ullah, 2024. "Natural resources, geopolitical conflicts, and digital trade: Evidence from China," Resources Policy, Elsevier, vol. 90(C).
    3. Islam, Md. Monirul & Sohag, Kazi & Mariev, Oleg, 2023. "Geopolitical risks and mineral-driven renewable energy generation in China: A decomposed analysis," Resources Policy, Elsevier, vol. 80(C).
    4. Xiang, Feiyun & Chang, Tsangyao & Jiang, Shi-jie, 2023. "Economic and climate policy uncertainty, geopolitical risk and life insurance premiums in China: A quantile ARDL approach," Finance Research Letters, Elsevier, vol. 57(C).
    5. Lu, Chengwu & Zafar, Muhammad Wasif & Cevik, Emrah I. & Destek, Mehmet Akif & Bugan, Mehmet Fatih, 2023. "Time and quantile domain connectedness between the geopolitical risk of China and precious metals markets," Resources Policy, Elsevier, vol. 85(PA).
    6. Li, Xin & Tong, Yan & Zhong, Kai & Xu, Guoquan & Zhao, Wenyi, 2024. "Geopolitical risk and foreign subsidiary performance of emerging market multinationals," Journal of Multinational Financial Management, Elsevier, vol. 72(C).
    7. Rumokoy, Lawren J. & Omura, Akihiro & Roca, Eduardo, 2023. "Geopolitical risk and corporate investment in the metals and mining industry: Evidence from Australia," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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