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<p>Understanding how geopolitical events affect stock market performance and volatility has become increasingly important, reflecting the growing influence of global geopolitical developments on financial market. Accordingly, this study investigates the dynamic impact of global and domestic geopolitical uncertainty on the UK’s stock market performance and volatility. Using cross-wavelet coherence analysis, we examine the co-movement between the FTSE-100 index (FTSE) and both the Global and UK geopolitical uncertainty (GPR). In the medium-term, the global and domestic GPR generally lead FTSE returns and volatility, while this relationship reversed during intense shocks (2017–2022) when FTSE volatility led both GPRs. Moreover, in the long-term, domestic GPR leads volatility, but FTSE returns led global geopolitical risk from 1994 to 2010, reflecting a forward-looking market response. The findings demonstrate that geopolitical risks play a pivotal role in shaping market dynamics, providing clear insight into the timing and mechanisms of market responses. Policy implications and guidance are provided to help investors, policymakers, and managers in facing periods of heightened uncertainty.</p>

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The Effect of Geopolitical Uncertainty on the Performance of the London Stock Exchange: Evidence from Wavelet Analysis

  • 期刊论文

  • 发表日期：

    2025年12月16日

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  • Achraf Yahia,
  • Yassine Mouhssine,
  • Fadoua EL Meslouhi,
  • Abdelkader EL Alaoui

摘要

Understanding how geopolitical events affect stock market performance and volatility has become increasingly important, reflecting the growing influence of global geopolitical developments on financial market. Accordingly, this study investigates the dynamic impact of global and domestic geopolitical uncertainty on the UK’s stock market performance and volatility. Using cross-wavelet coherence analysis, we examine the co-movement between the FTSE-100 index (FTSE) and both the Global and UK geopolitical uncertainty (GPR). In the medium-term, the global and domestic GPR generally lead FTSE returns and volatility, while this relationship reversed during intense shocks (2017–2022) when FTSE volatility led both GPRs. Moreover, in the long-term, domestic GPR leads volatility, but FTSE returns led global geopolitical risk from 1994 to 2010, reflecting a forward-looking market response. The findings demonstrate that geopolitical risks play a pivotal role in shaping market dynamics, providing clear insight into the timing and mechanisms of market responses. Policy implications and guidance are provided to help investors, policymakers, and managers in facing periods of heightened uncertainty.