The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities

This study examines the influence of the Russo-Ukrainian war on financial markets, conditioned upon a country's dependence on Russian commodities, employing a large panel of 73 countries. Financial markets reacted to the war-induced shock significantly, with a weaker effect on asset prices than volatility. Markets perceived the dependence on Russian commodities as a significant risk factor, sinking stock returns and intensifying instability. The effect of the war on returns was significant for countries with a dependence beyond the [0-20%] level, suggesting a threshold for an adverse effect on asset prices. The armed conflict exacerbated volatility regardless of depen-dence levels; the effect increased with dependence. Results have implications for diversification strategies in international exchanges.

Automated summary

This study examines the influence of the Russo-Ukrainian war on financial markets, revealing significant reactions and effects on asset prices and volatility. It also found that dependence on Russian commodities intensifies instability and reduces stock returns. The research has implications for diversification strategies in international exchanges.