Russia–Ukraine crisis: The effects on the European stock market

Abstract

We examine the effect of the Russia–Ukraine crisis on the European stock markets. Because of increased political uncertainty, geographic proximity and the ramifications of the fresh sanctions imposed on Russia, the European stock markets tended to react negatively to this crisis. We find that on 21 February 2022, when Russia recognized two Ukrainian states as autonomous regions, European stocks incurred a significant negative abnormal return. Moreover, the negative stock price reactions continued in the post‐event period. The magnitude of the stock price reactions to this crisis exhibits considerable variation across industries, countries and size of the company.

UK, US, and China’s Stock Market Reactions to The Russia-Ukraine War: An Inspection across Industries

“…Our study confirms and expands the conclusion made by Ahmed et al (2022) in a broader industrylevel perspective that, in general, investors in the three countries have taken the Russia-Ukraine crisis seriously enough. The war's adverse impact has already spread from political field to panics about energy supply, financial stability, and long-term economic development.…”

“…Moreover, sanctions imposed as a result of the crisis could impair financial intermediation and trade, raising fears of slower economic growth and faster inflation around the world. Thus, the impact of this crisis is much broader and more profound than that of previous political events, as proposed by Ahmed et al, 2022. Salisu et al (2022 also demonstrated that geopolitical threats such as military build-ups have a greater negative impact on stock returns than the actual occurrence of geopolitical behavior, while more specific research on industries is expected to be conducted.…”

“…Some prior studies have investigated the impacts of war on the world economy and global stock markets and found the economic causes and consequences of armed conflicts (Leigh et al, 2003;Schneider et al, 2006;Hudson et al, 2015). Meanwhile, some documents have also investigated the significant impact of the Russia-Ukraine war on the geographically adjacent European region (Ahmed et al, 2022). The research shows that Russia-Ukraine crisis hurt European stock markets through economic and political channels.…”

“…estimation window, which is from 1 November 2020 to 10 January 2022. Following Ahmed et al (2022), the abnormal returns are calculated over the event window with 8 different lengths, [−𝑋, +𝑋], 𝑋 = 1, 2, 3, 5, 10, 15, 20, 25 (Note: Window [−𝑋, 𝑋] represents the range from the 𝑋 𝑡ℎ trading day before the event date of 22 Feb 2022 to the 𝑋 𝑡ℎ trading day following the event. ), representing different lengths of horizons.…”

The Impact of the Russia-Ukraine Conflict on Stock Market Performance: Event Study Analysis

“…There was a huge negative impact on CAR for countries with close boundaries with EU countries. (Ahmed et al, 2022) analysed that the crisis of the Russia-Ukraine war led to a negative stock return for European stocks even after the event period.…”