title: Geopolitical threats, equity returns, and optimal hedging
abstract: In this paper, we demonstrate that the U.S. equity market and a few specific sectors produce significantly positive returns during high geopolitical threats, even with the presence of standard controls, whereas other major markets around the world fail to exhibit such results. We use the geopolitical threats (GPT) index of <a href="https://www.sciencedirect.com/science/article/pii/S1057521923003514#bb0110">Caldara and Iacoviello (2022)</a>. We extend our study by examining the equity returns dur