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Expect the unexpected: Did the equity markets anticipate the Russo-Ukrainian war?

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  • Granát, Marcell P.
  • Lehmann, Kristóf
  • Nagy, Olivér
  • Neszveda, Gábor

Abstract

In 2022, Russian military operations began in Ukraine, which surprised some, while others might have expected it. We investigate whether the expectations began to be priced in the equity markets before the operations. To estimate the start of information incorporation, we use the adjusted returns of 62 country-level stock market data assuming informed traders using a non-linear model and rolling-window regressions. We find that the equity markets started to price the conflict at least 50 days before the invasion, and approximately one-third of the information was incorporated on the event day.

Suggested Citation

  • Granát, Marcell P. & Lehmann, Kristóf & Nagy, Olivér & Neszveda, Gábor, 2023. "Expect the unexpected: Did the equity markets anticipate the Russo-Ukrainian war?," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006736
    DOI: 10.1016/j.frl.2023.104301
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    Keywords

    Russia-Ukraine conflict; Information incorporation; Stock prices; Event study; Abnormal returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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