| Abstract [eng] |
This paper analyses the impact of global events and investor behavior on the European stock market, with the aim of assessing how these factors affect stock returns and volatility. The relevance of the study is created by the increasing volatility of financial markets and the growing importance of geopolitical events and investor sentiment in shaping stock market dynamics. Theoretical and empirical analysis has revealed that stock market movements are driven by a complex interaction of macroeconomic, geopolitical and behavioral factors. The study found that geopolitical events most often manifest as external shocks, increasing market volatility and overall uncertainty, while investor sentiment significantly affects short-term stock price reactions. It has also been found that the extent of the impact of these factors is not the same – it depends on the specifics of the industry sector under analysis and the prevailing economic context. The object of the study – the dynamics of returns and volatility in European stock markets. The aim of the study – to assess the impact of global events and investor behavior on European stock market returns and volatility. The results of the scientific research analyzed in the first part of the paper revealed that geopolitical events and external shocks are most often associated with increased uncertainty, negative stock return reactions and increased market volatility. However, it was found that the direction and intensity of these effects depend on the specific characteristics of the analyzed region, industrial sector and the nature of the events. Theoretical analysis confirmed that the stock market is shaped by the interaction of multiple factors, which include economic, investor behavior and geopolitical aspects, therefore there is a need to evaluate the selected factors in a complex and empirical manner. In the empirical part of the work, multiple regression analysis was applied and the GARCH(1,1) model was used. The study analyzed both daily and monthly data on the returns of MSCI Europe sector indices over the period 2006-01-31 – 2026-01-30. The independent variables selected were „Brent“ crude oil, EUR/USD exchange rate, geopolitical risk index, German 10-year government bond yield and investor fear index. It was found that investor behavior has a statistically significant negative impact on the returns of all MSCI Europe sector indices analyzed. Meanwhile, the impact of geopolitical risk was mostly indirect and statistically insignificant, which suggests that investors’ reactions to geopolitical events are more likely to be expressed through investor sentiment and expectations. In addition, it was observed that different industrial sectors react differently to the same global events: cyclical sectors were more sensitive to market shocks, while defensive sectors were more stable when geopolitical unrest prevailed in the market. The results of the GARCH models revealed strong persistence of volatility across all analyzed MSCI Europe industry sectors, suggesting that market shocks have a long-term impact on stock returns and their volatility. Although the models explained a significant part of the variation in the selected sectoral returns, the results also reflect that additional, sector-specific factors also affect the dynamics of European stock markets. The results of the study highlight the importance of a comprehensive approach when analyzing financial markets and assessing the influence of geopolitical and investor behavioral factors. Such research can be useful for both investors and financial analysts or policymakers who need to make decisions under conditions of increased uncertainty and geopolitical tension. |
