The impact of geopolitical risk on stock markets and tourism sector: Case for developed markets and Turkey

Tourism has always been crucial sector nowadays for both emerging and advanced countries due to its numerous benefits such as economic, social, environmental political etc. Therefore, all countries attempt to promote its tourism attractiveness by using touristic advantages of their countries. However, tourism is sensitive to all kind of risks. Especially, geopolitical risk has effects on all countries, emerging countries can be affected more against geopolitical risk. In this context, it has become important to measure the geopolitical risk of countries and a geopolitical risk index has been created by Caldara and Iacoviello. Therefore, this thesis tries to answer the question of how much geopolitical risk impact on stock markets and tourism sector. In this regard, this thesis aims to analyze the impact of geopolitical risk on stock markets and tourism sector of selected 6 countries, namely Denmark, Sweden, Finland, United States of America, England and Türkiye via employing geopolitical risk index and Diebold-Yılmaz methodology. To the best of our knowledge, this methodology was not used to find the impact of geopolitical risk on tourism stocks Moreover, national broad indices, as well as tourism and leisure stock indices is employed to understand the impact of geopolitical risk on tourism sector and stock market. Results indicate that the effect of geopolitical risk on the stocks of the Nordic countries is weak or even non-existent, whereas it is much more pronounced for the USA, which is mainly attributable to its leading role in the world. More importantly, we show that geopolitical risk hinders the performance of emerging markets the most. Therefore, Turkish stocks and especially tourism companies are the most highly affected stocks between sample countries.