The invasion of Ukraine and the energy crisis: Comparative advantages in equity valuations

Fabrizio Ferriani and Andrea Giovanni Gazzani

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: We study the impact of the widening energy price differentials caused by the war in Ukraine on the returns of European and US firms. Using several measures of firms’ exposure to energy consumption, we show that return differentials between European and US firms widened significantly after the outbreak of the war in Ukraine. Our results indicate a persistent comparative disadvantage between the two regions, driven by heterogeneous energy costs, which has continued even after the partial subsiding of the energy shock by the end of 2022. These findings suggest that, the combination of higher energy costs and more vulnerable energy supplies may have lasting economic implications for Europe, potentially exacerbating its competitiveness disadvantages compared with other geographic regions that have access to more affordable and safer energy inputs.

Keywords: War in Ukraine; Energy impacts; Energy comparative advantage; Financial performance (search for similar items in EconPapers)
JEL-codes: G12 G14 G32 G33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: The invasion of Ukraine and the energy crisis: comparative advantages in equity valuations (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009765

DOI: 10.1016/j.frl.2023.104604

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