Quantile-based analysis of geopolitical risk spillovers across sustainable finance, energy markets, precious metals, and FinTech

Abstract

Type of the article: Research ArticleThis study aims to investigate how geopolitical risk shocks influence return dynamics, volatility transmission, and hedging properties across sustainable financial assets, financial technology instruments, energy markets, and precious metals during major global crisis episodes over a daily period from June 15, 2018, to September 14, 2024. We examined three major events: the trade conflict between the United States and China from June 15, 2018, to November 30, 2019; the COVID-19 pandemic from December 22, 2019, to February 23, 2023; and the ongoing wars between Russia and Ukraine, as well as Hamas and Israel, from February 24 to September 14, 2024. We found anomalies explained by the volatility of these returns. Using static, dynamic, and fractional QVAR methodology, we concluded that gold and two indicators of green finance can be considered safe-haven assets and hedging instruments, while FinTech plays a stabilizing role during these crises. Spillovers and connectivity networks at the median quantile validate the negative impact of geopolitical risk on non-renewable energy. However, we observed that the geopolitical risk index does not significantly affect green finance indicators, eco-friendly cryptocurrencies, or various measures of FinTech, with a low sensitivity of this index to gold prices.