Abstract
A quarter of a century after the first Russian joint stock companies were set up, the Russian equity market has become the leading market in Eastern and Central Europe. Russia has a state of the art trading and settlement system, with the Moscow Exchange (MOEX) being its centerpiece. The Russian joint stock companies successfully introduce the best practices of corporate governance. The accounting system is becoming more and more adequate and transparent. However, in the last decade the Russian stock market has demonstrated one of the worst returns in the world among the 20 largest economies. Judged by the main indicators (P/E, P/B, Dividend Yield) the Russian market looks very much undervalued. The authors analyze the causes of this situation, define the factors which impact most the Russian stock market (the ownership structure, volatility, dividend policy, the role of foreign investors, correlation with oil prices) and make the conclusion that the most important factor has been the sanctions imposed upon the largest Russian companies after 2014.
Highlights
In autumn 2017, the Russian equities market celebrated its 25 anniversary
The large-scale privatization that started in 1992 gave birth to joint stock companies, whose securities are traded in Russia and abroad**
In 2005-2007, the Russian stock market demonstrated the annual growth of 30-40% and was one of the best in the world in terms of return
Summary
In autumn 2017, the Russian equities market (we use the terms stocks, equities and shares th interchangeably) celebrated its 25 anniversary. The large-scale privatization that started in 1992 gave birth to joint stock companies, whose securities are traded in Russia and abroad (in the form of GDRs and ADRs)**. In 2005-2007, the Russian stock market demonstrated the annual growth of 30-40% and was one of the best in the world in terms of return. **Some early steps in the development of the Russian stock markets before have been observed in Rubtsov (2013), Kuznetsova, Kuznetsov, Mirkin (2011). The domestic market capitalization of Russian equities in dollar terms in 2014-2017 was US$ 448 623 billion (Table 1). Judged by the traditional indicators of P/E, P/B, Div.Yield, the Russian stock market looks extremely undervalued (Table 3). The importance of the stock market (and of financial markets in general) has been widely discussed in the Journal of Reviews on Global Economics, 2018, Vol 7
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