A Russian carol: impact and dependence on global equity markets during the Ukraine invasion

Abstract

Purpose– The authors present a study of the short-term impact of the Russian–Ukrainian war on global equity returns. The study aims to show that the conflict was priced into markets and whether the intensity of the impactdependsoneconomicfactors,suchasdependenceongas,or/andpoliticalfactors, suchasbelonging to the former Soviet power circle. Design/methodology/approach–Usingtheeventstudyandasampleof77capitalmarkets,accountingfor over 99% of global capitalisation, the authors apply a system of seemingly unrelated regressions to the daily returns of the indices, isolating the short-term effect on the markets and finally apply cross-sectional methods to help determine the size and variability of the impact. Findings– The authors show that the impact is concentrated around day zero but is relevant in the days before andafter. In addition, the authors showthat beingin theSovietorbit andNATOsimultaneously, aswell as having high gas consumption and importing gas from Russia were key factors for investors. Originality/value–Thisstudyisthefirsttotrytodiscernwhethertheimpactonstockmarketscausedbythe war in Ukraine is due to purely economic factors, especially energy, or whether there is also a geopolitical component.Specifically,whetherthecountriesclosest to Russiaarebeingmorethreatenedbythefactthatthey are closer to Russia.