Journal article · 2022

Hedging geopolitical risks with different asset classes: A focus on the Russian invasion of Ukraine

Będowska-Sójka, B., Demir, E., Zaremba, A.

Finance Research Letters, 50, 103192

DOI: 10.1016/j.frl.2022.103192

Abstract

We examine the hedging properties of different asset classes as impacted by the Russian invasion of Ukraine in 2022. We employ wavelet coherence analysis to study the impact of geopolitical risk on various types of securities. We found that different asset classes exhibited unequal risk sensitivity in both magnitude and timescale. Bonds and stocks displayed strong coherence for multi-week horizons, whereas currencies were affected at shorter periods. The green bonds, gold, silver, Swiss franc, and real estate proved the most resistant to geopolitical risk fluctuations. Hence, they may serve as the best hedge against geopolitical risk.

Keywords: Geopolitical risk hedging, Russia-Ukraine war, Invasion, Financial markets, Wavelet coherence analysis, Co-movement

Full text: see the publisher version via DOI.

Preprint: https://doi.org/10.2139/ssrn.4085689

Research topics: Safe havens, hedging and geopolitical risk

Funding

Cite

@article{frl2022_hedging_ukraine,
  title = {Hedging geopolitical risks with different asset classes: A focus on the Russian invasion of Ukraine},
  author = {Będowska-Sójka, B. and Demir, E. and Zaremba, A.},
  year = {2022},
  journal = {Finance Research Letters},
  note = {50, 103192},
  doi = {10.1016/j.frl.2022.103192}
}