NEW WORKING PAPER: This paper shows that geopolitical risk is an important predictor of tail risks in the investment growth distribution. Using the growth-at-risk framework, we document that higher geopolitical risk predicts lower left tails, while having no impact on the other parts of the distribution. We document higher uncertainty during periods of heightened geopolitical risks, when also the distribution becomes more left-skewed, leading extremely negative outcomes to become more likely. Additional structural analysis based on local projections shows that GPR shocks have larger dynamic effects on the left tail of the distribution, affecting particularly and significantly downside risk.
You are welcome to download, share, or comment on the following working paper:
- Anobile, F., Frangiamore, F., Matarese, F., Saadaoui, J. (2025). Investment-at-Risk of Geopolitical Tensions (September 27, 2025). Available at SSRN: 5536200.
