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Reactions of Global Stock Markets to the Russia–Ukraine War: An Empirical Evidence

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Emon Kalyan Chowdhury at Chittagong Independent University
Emon Kalyan Chowdhury
Iffat Ishrat Khan at Chittagong Independent University
Iffat Ishrat Khan
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This study measures the immediate impact of Russia–Ukraine war on the global stock markets for the first four months since Russia’s first invasion attempt on February 24, 2022. Daily closing stock indices have been used from selected stock markets of six different continents. By applying event study method, it observes mixed impact on different stock markets. Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH 1,1) indicates the presence of significant volatility and leverage effect in all the markets. Regression estimates show significantly positive impact of VIX and negative impact of oil on the abnormal returns of the global stock markets. Diversifying energy supply and source, accelerating deployment of renewables and promoting electronic vehicles and machines might bring positive result for the financial market. It is expected that this research will provide policymakers, regulatory authorities, investors and all concerned stakeholders a precise guideline to handle the immediate impact of war on the stock prices and to formulate appropriate strategies to keep investment free from risk and uncertainties.
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Vol.:(0123456789)
Asia-Pacific Financial Markets (2024) 31:755–778
https://doi.org/10.1007/s10690-023-09429-4
1 3
ORIGINAL RESEARCH
Reactions ofGlobal Stock Markets totheRussia–Ukraine
War: AnEmpirical Evidence
EmonKalyanChowdhury1 · IatIshratKhan1
Accepted: 6 September 2023 / Published online: 5 October 2023
© The Author(s), under exclusive licence to Springer Japan KK, part of Springer Nature 2023
Abstract
This study measures the immediate impact of Russia–Ukraine war on the global
stock markets for the first four months since Russia’s first invasion attempt on Febru-
ary 24, 2022. Daily closing stock indices have been used from selected stock mar-
kets of six different continents. By applying event study method, it observes mixed
impact on different stock markets. Exponential Generalized Autoregressive Condi-
tional Heteroskedasticity (EGARCH 1,1) indicates the presence of significant vola-
tility and leverage effect in all the markets. Regression estimates show significantly
positive impact of VIX and negative impact of oil on the abnormal returns of the
global stock markets. Diversifying energy supply and source, accelerating deploy-
ment of renewables and promoting electronic vehicles and machines might bring
positive result for the financial market. It is expected that this research will provide
policymakers, regulatory authorities, investors and all concerned stakeholders a pre-
cise guideline to handle the immediate impact of war on the stock prices and to for-
mulate appropriate strategies to keep investment free from risk and uncertainties.
Keywords Stock markets· Volatility· War· Russia· Ukraine· Event study
JEL Classification H56· G11· G14· G15· B23
1 Introduction
The current Russia–Ukraine war could be root back to the year 2014 when both
the nations fought over the territory of Crimea, traditionally considered as part
of Ukraine (Jones etal., 2021). From 2014 to late 2021 the war between the two
nations remained concentrated mostly over the issue of Crimea only (“Respond-
ing to Russia’s New,” 2021). However, from the late 2021, Russian military
* Emon Kalyan Chowdhury
emonkalyanchy@gmail.com
1 CIU Business School, Chittagong Independent University, Minhaj Complex, 12 Jamal Khan
Road, Chattogram4000, Bangladesh
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... The regression coefficients estimated in the estimation window are then used to generate expected values in the evaluation window. The economic models may seem appealing in that they involve more variables and go beyond stock-index relationship, Brenner (1997), MacKinlay (1997, and Chowdhury and Khan (2023) argued that the additional variables often provide relatively little reduction in the unexplained variance and the market model is practically the preferred one. ...
... The study is carried out at the index level based on MacKinlay (1997) and Chowdhury and Khan (2023). Thus, country specific indices are compared to the global one. ...
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121 This work is licensed under a Creative Commons Attribution 4.0 International License. The capital markets are sensitive to geopolitical events. It is important to provide evidence of reactions to specific geopolitical events in order to identify general patterns and effective risk management strategies. This study follows the event study approach to assess the reactions of different stock markets to the Russo-Ukrai-nian war in 2022. The 12 stock markets are represented by the relevant indices and benchmarked against the MSCI World Index. The markets considered include developed, emerging, and frontier ones. The results suggest the presence of the proximity penalty. Especially, Poland showed the highest correction during the event day. The markets outside Europe (the US, Canada, and Australia) did not show significant cumulative abnormal returns for the whole event window, yet such corrections were noted for certain sub-periods within the window. These results can be used for designing risk management strategies in the Central and Eastern Europe.
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... Несмотря на значимость темы, в настоящее время ощущается недостаток исследований по работе с заблокированными активами. Большинство работ посвящено влиянию санкций на экономику, мерам противодействия, механизмам государственного регулирования и разработке возможных инструментов по защите прав инвесторов, пострадавших в результате блокировки активов [6][7][8][9][10] или влиянию на отдельные отрасли экономики и ценообразование [11,12]. Ряд работ посвящен анализу влияния санкций и макроэкономических показателей на финансовый рынок, причем не только российский, но и европейский, и мировой [13][14][15], на стоимость акций и оценку доходности и риска ценных бумаг и фондовых индексов, а также на возможные механизмы для инвесторов по работе с заблокированными активами [16][17][18]. ...
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... It was estimated that 90% of the country's population could fall below the poverty line [56]. Recent research has explored the war's effect on global equity markets, [14,19] demonstrated that the invasion caused negative cumulative abnormal returns for overall stock market indices, highlighting how international conflicts make countries' economies vulnerable. ...
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Developing the methodology for evaluating blocked securities
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Subject. This article examines the expediency and possibilities of assessing the value of blocked shares of foreign issuers on the basis of the application of cost, income, comparative approaches and their inherent valuation methods for the purpose of further use, including the sale of assets by their owners on the organized over-the-counter market. Objectives. The article aims to substantiate the relevance of the application of the author-developed assessment methodology concerning blocked securities in the context of the demanded return of investment resources of Russian investors on the organized OTC market. Methods. For the study, I used the methods of systems and comparative analyses, as well as the comparative approach, paired sales method, and graphical method. Results. The article finds that the use of a comparative approach for a fair assessment of the value of blocked shares of foreign issuers, which includes an adjustment (discount) of the exchange quotation of the security and takes into account the circumstances of blocking in relation to the assets being valued, is possible only by the method of paired sales. Conclusions. The article concludes that the application of the author-developed methodology for evaluating blocked securities on the basis of the comparative approach and the paired sales method for involvement in economic turnover or transactions in the OTC market guarantees the most reliable results and seems to be the most relevant.
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