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The impact of the Russia-Ukraine conflict on market efficiency: Evidence for the developed stock market

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  • Gaio, Luiz Eduardo
  • Stefanelli, Nelson Oliveira
  • Pimenta, Tabajara
  • Bonacim, Carlos Alberto Grespan
  • Gatsios, Rafael Confetti

Abstract

This paper investigates the impact of the Russia-Ukraine conflict on the stock market efficiency of six developed countries. The sample is composed of daily stock index data from the United States (US), United Kingdom, Germany, France, Italy and Spain. Market efficiency was analyzed by the multifractal structure of the series of returns in four periods (full series, COVID-19 outbreak, before the conflict and after the conflict). The results show the presence of multifractality of the index's return series in periods of crisis. The evidence rejects the market efficiency hypothesis and indicates the predictability of asset prices in times of instability and global financial crisis. Our findings can help fund managers, institutional investors, and investors in general to make decisions about asset allocation in times of crisis.

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  • Gaio, Luiz Eduardo & Stefanelli, Nelson Oliveira & Pimenta, Tabajara & Bonacim, Carlos Alberto Grespan & Gatsios, Rafael Confetti, 2022. "The impact of the Russia-Ukraine conflict on market efficiency: Evidence for the developed stock market," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004858
    DOI: 10.1016/j.frl.2022.103302
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    3. Villena, Marcelo J. & Araneda, Axel A., 2024. "On sectoral market efficiency," Finance Research Letters, Elsevier, vol. 61(C).
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    5. Yousaf, Imran & Hunjra, Ahmed Imran & Alshater, Muneer M. & Bouri, Elie & Li, Yanshuang, 2023. "Multidimensional connectedness among the volatility of global financial markets around the Russian-Ukrainian conflict," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    6. Adekoya, Oluwasegun B. & Asl, Mahdi Ghaemi & Oliyide, Johnson A. & Izadi, Parviz, 2023. "Multifractality and cross-correlation between the crude oil and the European and non-European stock markets during the Russia-Ukraine war," Resources Policy, Elsevier, vol. 80(C).
    7. Abakah, Emmanuel Joel Aikins & Abdullah, Mohammad & Tiwari, Aviral Kumar & Wali Ullah, G M, 2024. "Asymmetric dynamics between geopolitical conflict sentiment and cryptomarkets," Research in International Business and Finance, Elsevier, vol. 69(C).
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    9. Piserà, Stefano & Chiaramonte, Laura & Paltrinieri, Andrea & Pichler, Flavio, 2024. "Firm systematic risk after the Russia–Ukraine invasion," Finance Research Letters, Elsevier, vol. 64(C).
    10. Tee, Chwee-Ming & Wong, Wai-Yan & Hooy, Chee-Wooi, 2023. "Financial sanctions and global stock market reaction: Evidence from the Russia-Ukraine conflict," Finance Research Letters, Elsevier, vol. 58(PB).

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    More about this item

    Keywords

    Efficiency market; Russian-Ukraine conflict; Hurst exponent;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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