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Betting on Conflict

A Prediction-Market Index of Geopolitical Risk

A daily index of geopolitical risk read from prediction markets. It aggregates the prices of Polymarket contracts on specific, verifiable conflict-related events into one number: where news-based indices measure how much is written about geopolitical tension, this one measures what traders expect to happen.

Current daily value

—/100index points

—7-day average

—30-day average

The index

Geopolitical risk, as priced by markets

Daily since 1 September 2024 · scale 0–100

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    About

    From bets to a measure of risk

    This index reads geopolitical risk from prediction markets. Each Polymarket price records what traders, staking their own money, expect about a specific outcome: a strike, an invasion, a ceasefire. Averaged across the conflict questions traded each day, these prices give a daily, forward-looking measure of risk.

    The best-known measure in the literature, the Geopolitical Risk index of Caldara and Iacoviello (GPR), counts newspaper articles on military threats and acts. It records what is written, not what is expected. The paper uses it as the benchmark, and you can compare the two on the chart.

    A “Yes” share on Polymarket pays one dollar if its outcome occurs, so its price reads as a probability. Three steps turn these prices into one series:

    1. Select

      Binary contracts whose platform tags tie them to inter-state conflict, military action or diplomatic rupture: 10,852 candidates.

    2. Orient

      A transparent, rule-based dictionary marks whether a “Yes” raises or lowers risk. “Will X invade Y?” and “Will the ceasefire hold?” point in opposite directions, so the second is flipped. 8,016 questions carry a direction.

    3. Aggregate

      Each day, the risk-oriented prices of the questions traded are averaged, weighting each by the volume traded on it that day, so the index follows where money is moving now.

    Findings

    What the index reveals

    Three results from the paper, in brief. Tests, specifications and robustness checks are in the paper.

    01

    Markets move before the news

    Moves in the index help anticipate the Geopolitical Risk index of Caldara and Iacoviello (GPR), which measures how much newspapers write about geopolitical tension. Coverage reacts most about six days after the market. The reverse does not hold: past coverage does not help anticipate the index. Compare the two by adding the GPR index to the chart.

    The tests are in the paper ↓
    Market index: this index, built from Polymarket prices. GPR index: Caldara and Iacoviello (2022), built from newspaper articles. The result holds for the overall GPR and for its threats and acts components.

    02

    Financial markets listen when risk is already high

    On an ordinary day the index says little about stock-market volatility. On high-risk days, when it sits in its top quarter above 64.4 points, its moves anticipate both the VIX and the S&P 500. Oil follows it in calm periods instead, while gold shows no link at any level of risk. See which days fall above the high-risk threshold.

    The tests are in the paper ↓
    Whether past moves in the index help anticipate each market, on calm days and on high-risk days.

    03

    It peaks before financial markets do

    After the most violent days of conflict recorded in the ACLED database, the index reaches its peak about a week later, several days ahead of the VIX, oil, gold and the S&P 500. The same ordering appears on a second set of conflict days drawn from the UCDP database.

    The tests are in the paper ↓
    Average number of trading days until each series reaches its peak after high-intensity conflict days (ACLED).

    Why it matters

    A forward-looking complement to the news

    Expectations, not coverage

    Read next to news-based measures, contract prices separate changes in the perceived probability of geopolitical outcomes from changes in the attention those outcomes receive.

    As fast as the market

    Because the index is built from trades, it can in principle be updated continuously. Its frequency is limited by liquidity, not by a publication schedule.

    Tied to verifiable events

    Every contract resolves against a published criterion, so each component of the index refers to a concrete outcome rather than to words appearing together in articles.

    Room to grow

    As event markets deepen, contract-level data allow indices by region, conflict type or theme, matched to the countries, industries and assets exposed to them.

    What to keep in mind

    • Markets exist where traders want them, so unpriced conflicts are invisible. Over this sample the index is driven largely by Middle East questions.
    • Thin markets can be manipulated, and volume is an imperfect proxy for information.
    • The sample is short and covers a period of elevated geopolitical tension.
    • The lead over the news is an in-sample result, not evidence of better out-of-sample forecasts.

    Data & paper

    Use the series

    The data

    Coverage
    Daily since 1 September 2024
    Scale
    0–100 index points
    Source
    Prices and volumes of Polymarket contracts, from the on-chain record indexed by Dune Analytics
    Averages
    Trailing means of the last 7 and 30 days, shown as reading aids
    Updates
    Daily

    Download the full series (CSV)

    Columns: date, index, index_7d_average, index_30d_average.

    Cite the paper

    Bellavite Pellegrini, C., Girgenti, R., Massaria, M. D. and Roncella, A. “Betting on Conflict: A Prediction-Market Index of Geopolitical Risk.”

    Credits

    News-based comparison: Caldara, D. and M. Iacoviello (2022), “Measuring Geopolitical Risk,” American Economic Review 112(4), 1194–1225. Data from matteoiacoviello.com/gpr.htm, CC BY. Event dates come from the sources linked under the chart.