The Cost of Russian Sanctions on the Global Equity Markets

We estimate the direct and indirect impact of Russian sanctions on the global equity markets since the Russian invasion of Ukraine. Countries that impose sanctions on Russia have higher institutional quality and lower corruption scores. Sanctions against Russia on average cost 0.11 trillion USD for each country’s stock market, and -2.39% for each stock. Given that the average stock’s market capitalization is 3.79 billion USD in our sample, the average loss is 90.7 million USD per stock. A back-of the envelop calculation suggests that the Russian stock market loses between 137 billion and 353 billion USD, which is 7% to 20% of Russian’s annual GDP. This is the loss from the listed sector alone and from the combined effect of invasion and the sanctions. The average equity market loss for the country that impose sanctions on Russia is close to 3% of its GDP, which is between 16% to 43% the loss that Russian suffers as percentage of its total GDP. We also show that even within country that impose sanctions on Russia, the firms that publicly announce a withdrawal of business from Russia suffers an additional 2.3% drop in their stock prices. These firms tend to have higher ESG governance, social, and environment scores