The BlackRock Geopolitical Risk Indicator (BGRI) is a tool for measuring the potential impact of geopolitical events on financial markets.
Developed by the world’s largest asset manager, BlackRock, the BGRI helps investors, economists, and policymakers monitor and assess the risks and opportunities associated with geopolitical events, such as conflicts, trade disputes, and political crises.
What is the BlackRock Geopolitical Risk Indicator?
The BlackRock Geopolitical Risk Indicator is an index that quantifies the market’s perception of geopolitical risk by analyzing the frequency and sentiment of news articles and financial analyst reports.
The BGRI uses natural language processing and machine learning algorithms to analyze tens of thousands of news sources and generate a score that represents the level of geopolitical risk.
A zero score represents the average BGRI level over its history.
A score of one means the BGRI level is one standard deviation above its historical average, implying above-average market attention to the risk.
Recent readings are weighted more heavily in calculating the average.
- A higher score indicates greater perceived risk.
- A lower score suggests that markets are less concerned about geopolitical events.
Why is the BlackRock Geopolitical Risk Indicator Important?
Geopolitical events can have significant implications for financial markets, influencing asset prices, investor sentiment, and economic growth.
The BGRI provides a quantitative measure of perceived geopolitical risk, allowing stakeholders to monitor changes in risk levels and assess the potential impact on their investments and decision-making processes.
How to Use the BlackRock Geopolitical Risk Indicator
The BlackRock Geopolitical Risk Indicator can provide valuable insights for investors
Traders can use the BGRI to assess the potential impact of geopolitical events on their investment portfolios.
A rising BGRI score may signal an increase in perceived geopolitical risk, which could lead to higher market volatility and lower asset prices.
Conversely, a falling BGRI score may indicate decreasing risk levels, potentially supporting higher asset prices and more stable financial markets.