Risks of investing in the Russian stock market: Lessons of the first decade

Abstract

The modern history of the Russian stock market has mirrored ups and downs of the country's transition as well as swings in investor perceptions. In this paper, we describe the evolution of the Russian stock market over its first decade, with particular attention to the risk factors driving stock returns. First, we analyze the development of the institutional infrastructure and dynamics of the market's size and liquidity measured by the number of listed and traded stocks, depositary receipts and IPOs as well as trading volume in the local stock exchanges and abroad. Then, we examine major political and economic events, which influenced the investor perceptions of the country risk and were reflected in stock prices. Finally, we carry out quantitative analysis of risk factors explaining considerable time and cross-sectional variation in Russian stock returns. We document a significant role of corporate governance, political risk, and macroeconomic risk factors, such as global equity markets performance, oil prices, and exchange rates, whose relative importance varied a lot over time.

Global Oil Prices, Oil Industry and Equity Returns: Russian Experience

“…The findings from this study are contrary to the work of Basher and Sadorsky (2006). It should be noted that due to restricted data availability Goriaev and Zabotkin (2006) used time series data for a period of 5 years only, 2000–2005. In addition, the emerging markets index MSCI EM has a relatively strong Russian representation – approximately 11% of the emerging markets index is represented by Russian companies.…”

“…They find strong evidence that oil price risk impacts stock price returns in emerging markets. Goriaev and Zabotkin (2006) analyse the risk factors driving stock returns specifically in the Russian equities market. The authors use a multi‐factor model comprising sectoral, emerging markets, world and commodity indices, as well as interest rates and exchange rates as risk determinants of the Russian stock exchange index RTS.…”

Ülke Riskinin Hisse Senedi Fiyatlarına Etkisi: İMKB 100 Endeksi Üzerine Bir Araştırma

“…(1986), Goriaev/Zabotkin (2006)'e göre, hisse senedi fiyatlan firmalann gelecekteki kazanç potansiyellerini yansıttığı için makroekonomik değişkenlere duyarlıdır. Ekonomik risk artıŞı, hisse senedi fiyatlarını ve dolayısıyla getirilerini düşürücü etki yaratmaktadır.…”

Investor Protection and Share Prices: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in Russia

“…This is obviously not the case in Russia. As noted by Goriaev and Zabotkin (2006), out of 350 stocks listed in the RTS, which is the largest stock exchange of Russia in terms of coverage, only a couple dozen were more or less regularly traded in the early 2000s. For many companies, no transactions were observed during consecutive days, weeks or even months.…”