Is geopolitical risk interconnected? Evidence from Russian-Ukraine crisis

Geopolitical risks have a catastrophic effect on financial markets. The Russia-Ukraine crisis had a significant impact on the stock markets with the effect persisting for a long time after the war declaration. Therefore, examining the activeness of equity markets during the Russia-Ukraine conflict is essential. Our study examined the interconnectedness in the global equity markets during the Russia-Ukraine crisis with a sample of 27 global equity markets, which included 17 developed, nine developing, and an actor nation (i.e., Russia). The study attempted to answer whether removing Russia from the global equity markets has brought any changes to the network. The results demonstrated that the crisis witnessed compactness in the network with higher interconnections among the markets. Russia brings inactiveness to the global equity markets as its presence decreases network density. Despite the fact that removing Russia from the system does not significantly alter network properties, there is a great deal of variation in network properties before and during the war, indicating that the conflict has indirectly caused structural changes in the equity markets. The study provides insight to market participants to design strategies to invest in the international markets during a geopolitical conflict.