News

War in Ukraine: How stock markets responded

21 Apr 2022

In a discussion paper, LMU researchers show that geographical proximity to Ukraine is a key factor in the stock market response to the war.

Jonathan Federle, doctoral researcher at the Institute for Capital Markets and Corporate Finance at LMU, and Victor Sehn, research assistant at the Institute for Accounting, Auditing, and Analysis at LMU, have investigated the stock market response to the war in Ukraine. As they show in collaboration with Professor Gernot Müller from the University of Tübingen and co-author André Meier, geographical proximity to Ukraine is a key factor in understanding the reaction on stock markets.

Their study shows that countries directly bordering Ukraine experienced an abnormal decline in equity indices of 23.1% in the four weeks around the onset of the war. For every 1,000 kilometers we move out from Ukraine, this effect on a country weakens, on average, by 2.6 percentage points.

Their study has appeared in the Discussion Paper Series of the Centre for Economic Policy Research (CEPR).

Publication

Jonathan Federle, André Meier, Gernot Müller, Victor Sehn: “Proximity to War: The stock market response to the Russian invasion of Ukraine”. Discussion Paper Series of the Centre for Economic Policy Research, April 2022

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