No link between geopolitical risk signals and returns – hedge fund

Gauges of geopolitical risk are better at predicting volatility than equity returns, research from XAI finds


Common indicators used to quantify geopolitical risk are not useful predictors of market returns, according to analysis carried out by hedge fund XAI Asset Management for

Two measures of geopolitical risk – the Economic Policy Uncertainty Index and the Geopolitical Risk Index – both scored poorly as predicters of returns, the analysis shows.

The firm’s analysts ran the same tests on Cboe’s Vix volatility index, which at times is heavily influenced by geopolitical risk, and reached

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