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Russian stock market in the aftermath of the Ukrainian crisis

Nivorozhkin, E; Castagneto-Gissey, G; (2016) Russian stock market in the aftermath of the Ukrainian crisis. Russian Journal of Economics , 2 (1) pp. 23-40. 10.1016/j.ruje.2016.04.002. Green open access

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Abstract

This paper studies the dynamic relationship between returns in the Russian stock market and global equity markets in the aftermath of the 2014 Ukrainian crisis. We apply dynamic goodness-of-fit and bootstrapped regression approaches to study the behavior of global equity indices. Our results reveal a significant fall in the degree of synchronicity between the Russian and global equity returns after the crisis outbreak. The Russian stock market clearly decoupled from both developed and emerging markets, as shown by a 30–50% decline in returns correlation. In view of dramatic increase in synchronicity across the Russian sectoral stock indices after the sanctions were introduced, our results suggest that the economic sanctions imposed on Russia during that period have effectively isolated the Russian equity market from the rest of the world and triggered extensive portfolio outflows from the Russian market. As a result of the economic sanctions and the limited choice of investments in Russia, the decreased co-movement between the Russian and global equity returns is unlikely to provide investors with superior diversification opportunities, whilst the returns of the Russian market in the medium-term will likely continue to be predominately driven by idiosyncratic news.

Type: Article
Title: Russian stock market in the aftermath of the Ukrainian crisis
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.ruje.2016.04.002
Publisher version: http://dx.doi.org/10.1016/j.ruje.2016.04.002
Language: English
Additional information: Copyright © Non-profit partnership Voprosy Ekonomiki. Hosted by Elsevier B.V. All rights reserved. Article made available under a Creative Commons license (CC BY-NC-ND 4.0)(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Keywords: synchronicity; decoupling; equity; stock market; Ukrainian crisis; Russia
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/1493033
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