From Russia with Volatility: War-induced Spillovers to CEE Stock Markets

Öz

This study investigates the volatility spillover dynamics between the Russian stock market and selected Central and Eastern European (CEE) markets in the context of the Russia-Ukraine war. The directional volatility transmissions from the IMOEX index, representing Russia, to the stock markets of Poland (WIG20), Czechia (PX), Hungary (BUX), Romania (BET), and Croatia (CROBEX) have been analyzed using daily closing price data obtained from Investing.com over the pre-war (February 24, 2016-February 24, 2019) and post-war (February 24, 2022-February 24, 2025) periods by employing the bivariate Full BEKK-GARCH model. By explicitly distinguishing between short-run shock effects and long-run volatility persistence, the study provides evidence on how geopolitical conflicts reshape regional risk transmission structures. The findings reveal a marked increase in volatility interactions following the outbreak of the war, particularly showing significant negative volatility spillovers from Russia to most CEE markets, indicating decoupling and defensive market behavior. As a robustness check, residual-based Granger causality tests derived from diagonal BEKK models support the core findings. The results demonstrate that geopolitical conflicts lead to structural changes in regional market linkages and highlight the need for stronger portfolio diversification strategies by investors and enhanced cross-border financial risk monitoring by policymakers during periods of war.

Anahtar Kelimeler

• Volatility spillovers
• BEKK-GARCH
• geopolitical risk
• Russia-Ukraine War

Rusya’dan Volatiliteyle: Savaş Kaynaklı Yayılımların CEE Hisse Senedi Piyasalarına Etkisi

Öz

Bu çalışma, Rusya-Ukrayna savaşı bağlamında Rus hisse senedi piyasası ile seçilmiş Orta ve Doğu Avrupa (CEE) piyasaları arasındaki volatilite yayılım dinamiklerini incelemektedir. IMOEX endeksiyle temsil edilen Rusya’dan Polonya (WIG20), Çekya (PX), Macaristan (BUX), Romanya (BET) ve Hırvatistan (CROBEX) hisse senedi piyasalarına yönelik volatilite aktarımları, Investing.com'dan elde edilen günlük kapanış verileri kullanılarak savaş öncesi (24 Şubat 2016-24 Şubat 2019) ve savaş sonrası (24 Şubat 2022-24 Şubat 2025) dönemler için ikili Full BEKK-GARCH modeli kullanılarak analiz edilmiştir. Çalışma, kısa dönem şok etkileri ile uzun dönem volatilite sürekliliğini ayrıştırarak, jeopolitik çatışmaların bölgesel risk aktarım yapısını nasıl dönüştürdüğünü ortaya koymaktadır. Bulgular, savaşın başlamasını takiben volatilite etkileşimlerinde belirgin bir artış olduğunu ve özellikle Rusya’dan çoğu CEE piyasasına doğru anlamlı negatif volatilite yayılımlarının ortaya çıktığını, bunun da ayrışma ve savunmacı piyasa davranışına işaret ettiğini göstermektedir. Sağlamlık kontrolü olarak, diagonal BEKK modellerinden türetilen artık tabanlı Granger nedensellik testleri temel bulguları desteklemektedir. Sonuçlar, jeopolitik çatışmaların bölgesel piyasa bağlantılarında yapısal dönüşümlere yol açtığını ve savaş dönemlerinde yatırımcılar açısından daha güçlü portföy çeşitlendirme stratejilerine, politika yapıcılar açısından ise sınır ötesi finansal risklerin daha etkin izlenmesine ihtiyaç duyulduğunu göstermektedir.

Anahtar Kelimeler

• Volatilite yayılımları
• BEKK-GARCH
• jeopolitik risk
• Rusya-Ukrayna Savaşı

Kaynakça

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