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The Russian Stock Market during the Ukrainian Crisis: A Network Perspective

Author

Listed:
  • Harald Schmidbauer

    (BRU-IUL, ISCTE Business Research Unit, ISCTE-IUL, Lisboa)

  • Angi Rösch

    (FOM University of Applied Sciences, Munich, Germany)

  • Erhan Uluceviz

    (Istanbul Kemerburgaz University, Istanbul, Turkey)

  • Narod Erkol

    (Universitat Autonoma, Barcelona, Spain)

Abstract

The goal of the this paper is to investigate the shock spillover characteristics of the Russian stock market during different rounds of sanctions imposed as a reaction to Russia’s alleged role in the Ukrainian crisis. We consider six stock markets, represented by their respective stock indices, namely the US (DJIA), the UK (FTSE), the euro area (Euro Stoxx 50), Japan (Nikkei 225), China (SSE Composite) and Russia (RTS). Linking these markets together in a network on the basis of vector autoregressive processes, we can measure, among other things: (i) direct daily return and volatility spillovers from RTS to other market indices, (ii) daily propagation values quantifying the relative importance of the Russian stock market as a return or volatility shock propagator, and (iii) the amount of network repercussions after a shock. The last two are methodological innovations in this context. It turns out that distinct spillover patterns exist in different rounds of sanctions. Large-scale sanctions, beginning in July 2014, rendered the consequences of shocks from Russia less predictable. While these sanctions reduced the importance of the Russian stock market as a propagator of return shocks, they also increased its importance as a propagator of volatility shocks, thus making the network more vulnerable with respect to volatility shocks from the Russian stock market. This is a form of backlash that the sanctioning economies have been facing.

Suggested Citation

  • Harald Schmidbauer & Angi Rösch & Erhan Uluceviz & Narod Erkol, 2016. "The Russian Stock Market during the Ukrainian Crisis: A Network Perspective," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(6), pages 478-509, December.
  • Handle: RePEc:fau:fauart:v:66:y:2016:i:6:p:478-509
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    Cited by:

    1. Costola, Michele & Lorusso, Marco, 2021. "Spillovers among Energy Commodities and the Russian Stock Market," MPRA Paper 108990, University Library of Munich, Germany.
    2. Erhan Uluceviz & Kamil Yilmaz, 2020. "Real-financial connectedness in the Swiss economy," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-20, December.
    3. Harald Schmidbauer & Angi Rösch & Erhan Uluceviz & Narod Erkol, 2016. "Are American and European equity markets in phase? --- Frequency aspects of return and volatility spillovers," EcoMod2016 9559, EcoMod.
    4. Schmidbauer, Harald & Rösch, Angi & Uluceviz, Erhan, 2017. "Frequency aspects of information transmission in a network of three western equity markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 486(C), pages 933-946.

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    More about this item

    Keywords

    : “Systemic five”; Russian stock market; Ukrainian crisis; sanctions; return spillovers; volatility spillovers; network dynamics; propagation value;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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