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

Pat Obi (), Freshia Waweru and Moses Nyangu
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Pat Obi: College of Business, Purdue University Northwest, Hammond, IN 46321, USA
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

JRFM, 2023, vol. 16, issue 5, 1-16

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.

Keywords: event study; abnormal returns; EGARCH; volatility persistence; Russia–Ukraine (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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