Expect the unexpected: Did the equity markets anticipate the Russo-Ukrainian war?

Abstract

In 2022, Russian military operations began in Ukraine, which surprised some, while others might have expected it. We investigate whether the expectations began to be priced in the equity markets before the operations. To estimate the start of information incorporation, we use the adjusted returns of 62 country-level stock market data assuming informed traders using a non-linear model and rolling-window regressions. We find that the equity markets started to price the conflict at least 50 days before the invasion, and approximately one-third of the information was incorporated on the event day.