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An Event Study on the Reaction of Equity and Commodity Markets to the Onset of the Russia–Ukraine Conflict

Author

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  • Pat Obi

    (College of Business, Purdue University Northwest, Hammond, IN 46321, USA
    College of Business and Economics, University of Johannesburg, P.O. Box 524, Auckland Park, Johannesburg 2006, South Africa)

  • Freshia Waweru

    (Strathmore University Business School, P.O. Box 59857, Nairobi 00200, Kenya)

  • Moses Nyangu

    (Strathmore University Business School, P.O. Box 59857, Nairobi 00200, Kenya)

Abstract

Using a standard event study methodology and the EGARCH model, this study examined the depth of market anomaly at the onset of the Russia–Ukraine conflict in 2022. Equity markets in Africa and G7 nations were analyzed for their varied political and economic connections to the conflict. While the G7 nations were strongly opposed to Russia, African countries remained neutral. This study shows that abnormal losses in the initial period of the conflict were larger and more persistent in the G7 markets, contradicting the widely held notion that more developed equity markets are more efficient than the less developed markets. EGARCH results revealed that volatility persistence was widely present, although the leverage effect was only confirmed for U.S. and Canada. Throughout the period, commodity prices rose sharply, producing significant abnormal gains in the futures market. Unfortunately, this had a deleterious effect on African economies due to their heavy reliance on grain and fuel imports, all of which are priced in U.S. dollars, and which also rose sharply during the period. This study concludes with suggestions on how to mitigate currency and commodity price shocks to dollar-reliant and import-dependent economies.

Suggested Citation

  • Pat Obi & Freshia Waweru & Moses Nyangu, 2023. "An Event Study on the Reaction of Equity and Commodity Markets to the Onset of the Russia–Ukraine Conflict," JRFM, MDPI, vol. 16(5), pages 1-16, April.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:5:p:256-:d:1131486
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    References listed on IDEAS

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    Cited by:

    1. Alberto Manelli & Roberta Pace & Maria Leone, 2024. "Russia–Ukraine Conflict, Commodities and Stock Market: A Quantile VAR Analysis," JRFM, MDPI, vol. 17(1), pages 1-11, January.
    2. Simone Boccaletti & Paolo Maranzano & Caterina Morelli & Elisa Ossola, 2024. "ESG Performance and Stock Market Responses to Geopolitical Turmoil: evidence from the Russia-Ukraine War," Working Papers 544, University of Milano-Bicocca, Department of Economics.

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