Navigating the nexus: Geopolitical risk, fossil energy prices, and European utility stock returns - Implications for environmental management and energy security in a conflict-ridden global landscape

Yang, Tianle; Fang, Sentao; Du, Anna Min; Du, Qunyang

Abstract

This study employs a TPV-VAR analysis method to explore the linkage between GPR, fossil energy prices, and utility stock returns across 16 European countries from August 2009 to April 2023. Our findings reveal variations over time in how GPR influences the prices of fossil energy and utility stock returns. GPR significantly influences stock returns in the short term (1 month), with prolonged effects observed during major geopolitical incidents, while showing no significance in the medium (6 months) and long term (12 months). Further, the Russia–Ukraine War had a more pronounced impact on fossil energy prices and utility stock returns compared with the Arab Spring and Brexit. Finally, GPR shocks exhibit heterogeneous effects on different fossil energy types, with oil prices being more affected than coal and gas prices. Energy prices act as a channel through which GPR influences utility stock returns. This study elucidates the linkage between GPR, prices of fossil energy, and stock returns, offering valuable perspectives for governments and investment decision-makers into risk management.

• Journal Article Type: Article
• Acceptance Date: Jan 8, 2024
• Online Publication Date: Jan 18, 2024
• Publication Date: 2024-02
• Deposit Date: Jan 29, 2024
• Publicly Available Date: Jan 19, 2026
• Print ISSN: 0301-4797
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 352
• Article Number: 120086
• DOI: https://doi.org/10.1016/j.jenvman.2024.120086
• Keywords: geopolitical risk (GPR), fossil energy prices, utility stock returns, TVR-VAR model
• Public URL: http://researchrepository.napier.ac.uk/Output/3495950