Trade matters except to war neighbors: The international stock market reaction to 2022 Russia’s invasion of Ukraine

Thiago Silva (), Paulo Victor Berri Wilhelm and Benjamin Tabak

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: We investigate the role of international trade and proximity to war in international stock markets during the invasion of Ukraine by employing DiD designs and panel data comprising 70 stock markets. We find that differences in trade exposure to warring countries (trade effect) have a substantial and negative impact on non-European equity markets but are irrelevant for European markets. In contrast, differences in the distance to warring countries (proximity effect) have a significant and negative impact on European markets but have no bearing on non-European markets. We find that the relevance of rent from mineral, natural gas, and oil resources and the relevance of metals, ores, and fuels in exports operate as mitigators of the trade effect. Our paper provides valuable empirical evidence regarding the importance of mitigating the vulnerability of financial markets to international trade when a major war breaks out.

Keywords: Russo–Ukrainian war; International stock markets; International trade; Proximity to war; Military expenditure; Difference-in-differences; Natural resources; Commodity trade; National culture (search for similar items in EconPapers)
JEL-codes: C58 F10 F51 G14 G15 H56 Q02 R10 Z10 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000612

DOI: 10.1016/j.ribaf.2023.101935

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