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Risks and Uncertainties in Financial Markets
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Risks and Uncertainties in Financial Markets

A special issue of International Journal of Financial Studies (ISSN 2227-7072).

Deadline for manuscript submissions: 31 December 2025 | Viewed by 42398

Special Issue Editors

Dr. Sahbi Farhani

E-Mail Website
Guest Editor
Higher Institute of Finance and Taxation of Sousse (ISFFS), University of Sousse, Sousse, Tunisia
Interests: financial markets; energy economics; sustainability; climate change
Special Issues, Collections and Topics in MDPI journals
Dr. Alaa M. Soliman

E-Mail Website
Guest Editor
Leeds Business School, Leeds, UK
Interests: economic growth; development economics; applied economics; applied macroeconomics; economics analysis; economic modeling

Special Issue Information

Dear Colleagues,

The aim of this Special Issue is to identify challenges and solutions related to the risks and uncertainties that arise in financial markets. It will feature papers on complex topics, exploring the following themes:

  • General equilibrium models in which the distinction between uncertainty and risk is formalized by assuming that there are several types of financial markets;
  • How uncertainties in financial markets can affect client decisions;
  • How the firm’s role in helping these clients may mitigate risks, and how shifting market dynamics can often present strategic opportunities for clients and financial markets;
  • The impact of uncertainty shocks on investment and consumption;
  • How financial frictions can play an important role in transmitting uncertainty shocks;
  • The impact of investor sentiments on financial markets’ volatilities.

This Special Issue welcomes empirical studies on a wide range of relevant topics including, but not limited to, the points indicated above.

We welcome contributions covering all the major areas of financial markets, uncertainty, and risk.

Dr. Sahbi Farhani
Dr. Alaa M. Soliman
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 250 words) can be sent to the Editorial Office for assessment.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. International Journal of Financial Studies is an international peer-reviewed open access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • financial markets
  • risks
  • uncertainties
  • financial frictions
  • uncertainty shocks

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Further information on MDPI's Special Issue policies can be found here.

Published Papers (7 papers)

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Research

33 pages, 2738 KB  
Article
Quantile Connectedness Between Stock Market Development and Macroeconomic Factors for Emerging African Economies
by Maroua Ben Salem, Naif Alsagr, Samir Belkhaoui and Sahbi Farhani
Int. J. Financial Stud. 2025, 13(4), 224; https://doi.org/10.3390/ijfs13040224 - 1 Dec 2025
Viewed by 126
Abstract
This paper investigates the frequency dynamics of financial and macroeconomic connectedness by measuring tail-risk and uncertainty for two emerging African economies, namely Morocco and Tunisia, over the quarterly period Q2-2010 to Q4-2024. We employ a quantile connectedness approach, which, unlike traditional mean-based methods, [...] Read more.
This paper investigates the frequency dynamics of financial and macroeconomic connectedness by measuring tail-risk and uncertainty for two emerging African economies, namely Morocco and Tunisia, over the quarterly period Q2-2010 to Q4-2024. We employ a quantile connectedness approach, which, unlike traditional mean-based methods, leads to capturing asymmetries, tail-risk dependencies, and state-dependent spillovers, and to providing early warning signals of systemic stress and financial uncertainty. Our results reveal a stark divergence between the two stock markets in their roles in transmitting and absorbing shocks. The Moroccan stock market acts as a net transmitter, occasionally driving macroeconomic conditions and propagating uncertainty throughout the system. In contrast, the Tunisian stock market acts as a net receiver, with macroeconomic fundamentals, particularly GDP and money supply. These findings highlight how structural differences in emerging markets affect the transmission of shocks and offer actionable insights for policymakers, regulators, and investors to manage financial risks and uncertainty. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
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33 pages, 4557 KB  
Article
Climate Shocks and Residential Foreclosure Risk: Evidence from Property-Level Disaster and Transaction Data
by Juan Sebastián Herrera, Jasmina M. Buresch, Zachary M. Hirsch and Jeremy R. Porter
Int. J. Financial Stud. 2025, 13(4), 213; https://doi.org/10.3390/ijfs13040213 - 7 Nov 2025
Viewed by 514
Abstract
As climate disasters intensify, their financial shockwaves increasingly threaten residential stability and the resilience of the U.S. mortgage market. While prior research links natural disasters to payment delinquency, far less is known about foreclosure—the terminal outcome of housing distress. We construct a novel [...] Read more.
As climate disasters intensify, their financial shockwaves increasingly threaten residential stability and the resilience of the U.S. mortgage market. While prior research links natural disasters to payment delinquency, far less is known about foreclosure—the terminal outcome of housing distress. We construct a novel property-level panel covering 55 flood, wildfire, and hurricane events, integrating transactional, mortgage, and insurance data. A difference-in-differences framework compares foreclosure rates for damaged parcels with nearby undamaged controls within narrowly defined hazard perimeters. Results show that flooding substantially increases foreclosure risk: inundated properties experience a 0.29-percentage-point rise in foreclosure likelihood within three years, with effects concentrated outside federally mandated flood-insurance zones. In contrast, wildfire and hurricane wind damage are associated with lower foreclosure incidence, likely reflecting standard insurance coverage and rapid post-event price recovery. These findings suggest that physical destruction alone does not drive credit distress; rather, insurance liquidity and post-disaster equity dynamics mediate outcomes. Policy interventions that expand flood insurance coverage, stabilize insurance markets, and embed climate metrics in mortgage underwriting could reduce systemic exposure. Absent such measures, climate-driven foreclosures could account for nearly 30% of lender losses by 2035, posing growing risks to both household wealth and financial stability. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
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23 pages, 377 KB  
Article
The Impact of Non-Performing Loans on Bank Growth: The Moderating Roles of Bank Size and Capital Adequacy Ratio—Evidence from U.S. Banks
by Richard Arhinful, Leviticus Mensah, Bright Akwasi Gyamfi and Hayford Asare Obeng
Int. J. Financial Stud. 2025, 13(3), 165; https://doi.org/10.3390/ijfs13030165 - 4 Sep 2025
Cited by 2 | Viewed by 7346
Abstract
Banks in the United States face persistent challenges from non-performing loans (NPLs), despite conducting thorough client evaluations before issuing loans. To mitigate the impact of NPLs and support both local and global growth, banks must adopt effective risk management strategies. This study investigates [...] Read more.
Banks in the United States face persistent challenges from non-performing loans (NPLs), despite conducting thorough client evaluations before issuing loans. To mitigate the impact of NPLs and support both local and global growth, banks must adopt effective risk management strategies. This study investigates the effect of NPLs on bank growth and the moderating of bank size and Capital Adequacy Ratio (CAR) through the lens of the Resource-Based View (RBV) theory. A sample of 253 banks listed on the New York Stock Exchange from 2006 to 2023 was selected using specific inclusion criteria from the Thomson Reuters Eikon DataStream. To address cross-sectional dependence and endogeneity, advanced estimation techniques—Feasible Generalized Least Squares (FGLS), Driscoll and Kraay standard errors, and the Generalized Method of Moments (GMM)—were employed. The results show that NPLs have a significant negative impact on banks’ asset and income growth. Furthermore, bank size and capital adequacy ratio (CAR) negatively and significantly moderate this relationship. These findings underscore the need for banks to enhance credit risk management by strengthening loan approval processes and leveraging advanced analytics to assess borrower risk more accurately. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
21 pages, 914 KB  
Article
Dynamic Spillover Effects Among China’s Energy, Real Estate, and Stock Markets: Evidence from Extreme Events
by Fusheng Xie, Jingbo Wang and Chunzi Wang
Int. J. Financial Stud. 2025, 13(2), 97; https://doi.org/10.3390/ijfs13020097 - 1 Jun 2025
Viewed by 2086
Abstract
This paper employs a Time-Varying Parameter Vector Autoregression Directional–Spillover (TVP-VAR-DY) model to investigate the dynamic spillover effects among China’s energy, real estate, and stock markets from 2013 to 2023, with a focus on the impact of extreme events. The findings show that the [...] Read more.
This paper employs a Time-Varying Parameter Vector Autoregression Directional–Spillover (TVP-VAR-DY) model to investigate the dynamic spillover effects among China’s energy, real estate, and stock markets from 2013 to 2023, with a focus on the impact of extreme events. The findings show that the total conditional spillover index (TCI) typically remains below 40% in the absence of extreme events, but significantly increases during such events, reaching 51.09% during the 2015 stock market crisis and nearing 60% during the COVID-19 pandemic in 2020. Specifically, the oil and gas market exhibited a net spillover index of 4.61%, emerging as a major source of risk transmission. In contrast, the real estate market, which had a net spillover index of −9.38%, became a net risk absorber. The net spillover index indicates that the risk transmission role of different markets towards other markets is dynamically changing over time and is closely related to significant global or domestic economic events. These results indicate that extreme events not only directly impact specific markets but also rapidly propagate risks through complex inter-market linkages, exacerbating systemic risks. Therefore, it is recommended to enhance market monitoring, improve transparency, and optimize risk management strategies to cope with uncertainties in the global economy and financial markets. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
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17 pages, 334 KB  
Article
Spillovers Between Euronext Stock Indices: The COVID-19 Effect
by Luana Carneiro, Luís Gomes, Cristina Lopes and Cláudia Pereira
Int. J. Financial Stud. 2025, 13(2), 66; https://doi.org/10.3390/ijfs13020066 - 15 Apr 2025
Cited by 1 | Viewed by 968
Abstract
The financial markets are highly influential and any change in the economy can be reflected in stock prices and thus have an impact on stock indices. The relationship between stock indices and the way they are affected by extreme phenomena is important for [...] Read more.
The financial markets are highly influential and any change in the economy can be reflected in stock prices and thus have an impact on stock indices. The relationship between stock indices and the way they are affected by extreme phenomena is important for defining diversification strategies and analyzing market maturity. The purpose of this study is to examine the interdependence relationships between the main Euronext stock indices and any changes caused by an extreme event—the COVID-19 pandemic. Copula models are used to estimate the dependence relationships between stock indices pairs after estimating ARMA-GARCH models to remove the autoregressive and conditional heteroskedastic effects from the daily return time series. The financial interdependence structures show a symmetric relationship of influence between the indices, with the exception of the CAC40/ISEQ pair, where there was financial contagion. In the case of the AEX/OBX pair, the dynamics of dependence may have changed significantly in response to the pressure of the pandemic. On the other hand, the dominant influence of the CAC40 before and the AEX after the pandemic confirms that the size and age of these indices give them a benchmark position in the market. Finally, with the exception of the AEX/OBX and CAC40/ISEQ pairs, the interdependencies between the stock indices decreased from the pre- to the post-pandemic sub-period. This result suggests that the COVID-19 pandemic has weakened the correlation between the markets, making them more mature and independent, and less risky for investors. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
20 pages, 6077 KB  
Article
Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model
by Junxiao Gui, Nathee Naktnasukanjn, Xi Yu and Siva Shankar Ramasamy
Int. J. Financial Stud. 2024, 12(4), 108; https://doi.org/10.3390/ijfs12040108 - 25 Oct 2024
Cited by 2 | Viewed by 25567
Abstract
This study employs the economic policy uncertainty index to gauge the level of economic policy uncertainty in China. Utilizing textual data from the growth enterprise market internet community, we construct the growth enterprise market investor sentiment index by applying the deep learning ERNIE [...] Read more.
This study employs the economic policy uncertainty index to gauge the level of economic policy uncertainty in China. Utilizing textual data from the growth enterprise market internet community, we construct the growth enterprise market investor sentiment index by applying the deep learning ERNIE (Enhanced Representation through Knowledge Integration) model, thereby capturing investors’ sentiment within the growth enterprise market. The dynamic interplay between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is scrutinized via the TVP-SV-VAR (time-varying parameter stochastic volatility vector auto-regression) model, and the asymmetric response of different industries’ stock returns within the growth enterprise market to economic policy uncertainty and investor sentiment shock. The findings of this research are that economic policy uncertainty exerts a negative influence on both investor sentiment and returns of the growth enterprise market. While it may trigger a temporary decline in stock prices, the empirical evidence suggests that the impact is of short duration. The influence of investor sentiment on the growth enterprise market returns is characterized by a reversal effect, suggesting that improved sentiment may initially boost stock prices but could lead to a subsequent decline over the long term. The relationship between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is time-variant, with heightened sensitivity observed during bull markets. Lastly, the effects of economic policy uncertainty and investor sentiment on the returns of different industries within the growth enterprise market are found to be asymmetric. These conclusions contribute to the existing body of literature on the Chinese capital market, offering a deeper understanding of the complex dynamics and the factors influencing market behavior. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
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19 pages, 3494 KB  
Article
China’s Stock Market under COVID-19: From the Perspective of Behavioral Finance
by Kaizheng Li and Xiaowen Jiang
Int. J. Financial Stud. 2024, 12(3), 70; https://doi.org/10.3390/ijfs12030070 - 19 Jul 2024
Cited by 1 | Viewed by 3526
Abstract
As a colossal developing economy, irrational, and inefficient trades broadly exist in China’s stock market and are intensified by the once-in-a-century COVID-19 pandemic. This atypical but prominent event enhances systemic risk and requires a more effective analysis tool that adapts to the investors’ [...] Read more.
As a colossal developing economy, irrational, and inefficient trades broadly exist in China’s stock market and are intensified by the once-in-a-century COVID-19 pandemic. This atypical but prominent event enhances systemic risk and requires a more effective analysis tool that adapts to the investors’ sentiment and behavior. Based on the behavioral asset pricing model, this paper verifies the existence of noise traders in China’s stock market, measures the intensity of the noise with the NTR indicator, and examines the market noise with IANM. Furthermore, the mechanism of how COVID-19 influences the market noise through investors’ behaviors is analyzed with the event study method. The findings show that, based on 92 Chinese companies, the market noise significantly exists, and the noise is associated with psychological biases including over-confidence, herding effects and regret aversion. These biases are affected to varying degrees by COVID-19-related events, leading to notable implications for market stability and investor behavior during crises. Our study provides critical insights for policymakers and investors on managing market risks and understanding behavioral impacts during unprecedented events. Full article
(This article belongs to the Special Issue Risks and Uncertainties in Financial Markets)
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