Russia–Ukraine crisis: The effects on the European stock market

TLDR

European stock markets reacted negatively to the Russia–Ukraine crisis because of heightened political uncertainty, geographic proximity, and new sanctions on Russia. The study examines the effect of the Russia–Ukraine crisis on European stock markets. The crisis produced a significant negative abnormal return on 21 February 2022, with continued negative reactions thereafter that varied across industries, countries, and firm size.

Abstract

Abstract We examine the effect of the Russia–Ukraine crisis on the European stock markets. Because of increased political uncertainty, geographic proximity and the ramifications of the fresh sanctions imposed on Russia, the European stock markets tended to react negatively to this crisis. We find that on 21 February 2022, when Russia recognized two Ukrainian states as autonomous regions, European stocks incurred a significant negative abnormal return. Moreover, the negative stock price reactions continued in the post‐event period. The magnitude of the stock price reactions to this crisis exhibits considerable variation across industries, countries and size of the company.