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The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities

Author

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  • Lo, Gaye-Del
  • Marcelin, Isaac
  • Bassène, Théophile
  • Sène, Babacar

Abstract

This study examines the influence of the Russo-Ukrainian war on financial markets, conditioned upon a country's dependence on Russian commodities, employing a large panel of 73 countries. Financial markets reacted to the war-induced shock significantly, with a weaker effect on asset prices than volatility. Markets perceived the dependence on Russian commodities as a significant risk factor, sinking stock returns and intensifying instability. The effect of the war on returns was significant for countries with a dependence beyond the [0–20%] level, suggesting a threshold for an adverse effect on asset prices. The armed conflict exacerbated volatility regardless of dependence levels; the effect increased with dependence. Results have implications for diversification strategies in international exchanges.

Suggested Citation

  • Lo, Gaye-Del & Marcelin, Isaac & Bassène, Théophile & Sène, Babacar, 2022. "The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004007
    DOI: 10.1016/j.frl.2022.103194
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    More about this item

    Keywords

    Russo-Ukrainian war; Financial markets; Asset returns; Volatility; Google trends; Commodity dependence;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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