The Impact of the Russia-Ukraine Conflict on Stock Market Performance: Event Study Analysis

Abstract

: The objective of this paper is to analyze short-term volatility and the Indian stock market’s reaction following the start of the Russia-Ukraine military conflict. In order to assess instantaneous market reaction, the event study method was used for the National Stock Exchange of India (NSE), with a specific emphasis on three dominant sectors – Information Technology (IT), Banking and Energy. Stock market performance one week before and after the event day was taken into consideration for comparison purposes and calculation of cumulative abnormal return rates. Furthermore, two event study methods have been applied: the mean-adjusted return model (MAR) and the market-adjusted return model (MKAR). According to expectations, analysis has shown negative reaction for all sectors on the event day; however there was a positive market recovery in the post-event period for two out of three sectors, exhibiting predominant behavioural overreaction and heightened volatility.