Geopolitical Risk and Stock Market Volatility

Abstract

This study shows how Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) affect stock market ups and downs in 17 major countries from January 2012 to December 2025. This study used a Panel Fixed Effects model. This study also uses three types of market changes: absolute volatility, squared volatility, and 12 month rolling volatility. It uses last month’s values to show how markets react with a delay. The results shows that both EPU and GPR make the market unstable. But their impacts are different from each other. That means they did not affect the market in the same way. EPU has a strong and most steady effect. From This we can see investors care a lot about to changes. Markets react quickly to global events. Then they adjust soon. The effect does not last long. The study also shows that GDP growth. The market becomes more stable when there was a GDP growth. This means a strong economy helps to keep financial markets stable. So, these findings show that stable economic policies are more important mainly for long-term market stability. This can help policymakers reduce uncertainty. And it will also help investors to make better decision.