Free DP Download 21 April 2022 - Stock Prices and the Russian-Ukraine War

Thursday, April 21, 2022

Ming Deng, Markus Leippold, Alexander F Wagner, Qian Wang CEPR Discussion Paper No. 17207 | April 2022

A new CEPR study by Ming Deng, Markus Leippold, Alexander F Wagner and Qian Wang investigates the stock price reactions of firms around the globe to the Russia-Ukraine war in early 2022 and its consequences. Among the findings: 

  • In the build-up to and in the weeks after the Russian invasion of Ukraine, stocks strongly exposed to the regulatory risks of the transition to a low-carbon economy did well. This was especially true of US stocks. 
  • However, in Europe, these stocks tended to underperform after the invasion, arguably because of stronger expected policy responses supporting renewable energy sources in the face of the pronounced dependence of Europe on Russian oil and gas. 
  • Investors thus expect the speed of transition to a low-carbon economy to be diverging between the US and Europe. 
  • Relating six different Environmental, Social, and Governance (ESG) measures with stock price performance yields mixed results, suggesting that investors cannot blindly rely on such measures in general to indicate corporate resilience against crises. 
  • Companies that more frequently refer to inflation in their conference calls with analysts performed worse than their peers.
  • Internationally oriented firms did poorly, and investors were particularly concerned regarding companies' exposure to China. 

Overall, the results offer a preview of the future economic impact of the Russia-Ukraine war.

Figure: Stock Market Reaction across Industries.

Note: This figure plots the market reaction of different GICS industries for three periods: Build-up (January 24 - February 23), Outbreak (February 24 - March 08), and Continuation (March 09 - March 31).