The impact of the Russo-Ukraine conflicts on price discovery on the financial markets

ABSTRACT

This paper investigates the response of financial markets to two significant events within the Russo-Ukraine conflicts: the November 2013 Euromaidan protest and the February 2022 Russian invasion of Ukraine. Employing diverse methods, including event studies, price discovery models, and time-varying parameter regression, we analyse abnormal returns, price discovery, time-varying herding behaviour, and market dynamics across various financial instruments, such as stock indices, currencies, and commodities. Overall, the Russian invasion of Ukraine had a more pronounced impact on financial markets compared to the Euromaidan protest. Moreover, during both events, the US dollar and yen consistently functioned as safe-haven assets. The findings also reveal variations in the responses of different assets to the conflicts, indicating potential effects on market efficiency, investor perceptions, and expectations.

KEYWORDS:

• War
• Price discovery
• Time-varying herding
• Markov Chain Monte Carlo (MCMC)
• Russia-Ukraine

JEL CLASSIFICATION:

• G14
• G15

Acknowledgements

We thank the Department of Business Administration, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia for providing the research grant (DEBA23-021-0027).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ See Mohamad (2022) and Bandyopadhyay and Rajib (2023) for price discovery model specifications.

² See Mohamad & Fromentin (2023) and Mohamad & Stavrioyannis (2022) for TVP regression with stochastic volatility specifications.

Additional information

Funding

The work was supported by the Department of Business Administration, KENMS, IIUM [DEBA23-021-0027].