Russian Stock Market Research Articles

О новых планах расширения фондового рынка как важной национальной основы развития российской экономики

Russia's current sanctions restrictions make it necessary to increase the importance of the stock market as an element of the domestic economy, which should play a significant role in generating the necessary amount of financial resources. Under the new conditions, the stock market has again begun to attract more attention from Russian companies as a source of capital. Recently, attention has been paid to the problems of development of this market segment at the highest state level. Nevertheless, for the current period, the Russian stock market is characterized by a number of features, the preservation of which may reduce its effectiveness for the economy, as well as restrain the inflow of investments. The article substantiates that when increasing the role of the stock market, it is also important to take into account the quality of such expansion and the mechanisms used, which in turn requires close attention from regulators.

АНАЛИЗ ЭТАПОВ СТАНОВЛЕНИЯ И РАЗВИТИЯ РОССИЙСКОГО ФОНДОВОГО РЫНКА

This article examines the stages of formation and development of the Russian stock market. The history of its evolution can be divided into two stages: pre-revolutionary and modern. It becomes clear that this tool has stimulated the development of the economy for a long time. After conducting a retrospective analysis of how the stock market has developed, we can conclude about its current state and prospects for its development.

РОССИЙСКИЙ ФОНДОВЫЙ РЫНОК: АНАЛИЗ ТЕКУЩЕГО СОСТОЯНИЯ

This article provides an assessment of the current state of the Russian stock market. In 2022, the Russian financial system faced unprecedented sanctions pressure. Many institutional players have left the Russian market. Nevertheless, it can be stated that for the domestic economy it is the most important institution that allows achieving a synergistic effect of the actions of individuals and businesses.

Digital maturity index for Russian public companies

Subject. The article addresses the digital premium in stock prices as a risk factor in multi-factor asset pricing models in the Swedish and Russian stock markets. Objectives. The purpose is to assess the level of digital premium as a risk factor in multi-factor pricing models, by using the corporate digital maturity index developed by L. Blixen-Fineke and his colleagues, and E.I. Gibadullin, based on data from Swedish and Russian issuers, respectively. Methods. The main research method is the analysis of financial and non-financial statements of 26 Swedish public companies and 51 domestic issuers from 11 sectors of the Russian economy. Results. The analysis revealed statistical significance of digital premium factor in the domestic stock market, as well as an incipient trend of excess of historical return of the investment portfolio of shares of companies with a high level of digital maturity over the portfolio of shares of companies with a low level of digital maturity. These results enable to modify current multi-factor asset pricing models to improve their explanatory power. Conclusions. The revealed empirical evidence of the existence of price anomaly in the form of digital premium creates the necessary evidence base for the development of research aimed at the evolution of multi-factor asset pricing models in the domestic stock market. The findings create a foundation for the development of factor-based investing on the Russian stock market, based on selection of company shares for the investment portfolio, considering the level of digital development of companies.

The impact of news about COVID-19 on the dynamics of the Russian stock market

Subject. The article addresses the Russian stock market during the COVID-19 pandemic. Objectives. The study aims at empirical substantiation of the influence of tonality of news about COVID-19 published in official sources and social networks, on the Russian stock market. Methods. We employ a set of methods and procedures to assess the sentiment of downloaded news texts and tweets and to model the dynamics of general and sectoral stock indices (bag-of-words method, Markov-switching GARCH models, evaluation of text tonality using EcSentiThemeLex dictionary). Results. The paper reveals the influence of the tone of coverage of events related to COVID-19 pandemic in news sources and social networks on changes in stock prices of Russian companies. We substantiated the existence of industry specifics in terms of the degree of influence of the tone of news and tweets on stock price dynamics. The findings can be used by investors and issuers to model and predict changes in securities prices, and complement the theory, by underpinning the significance of the tonality of messages in the news and social networks for the dynamics of the Russian stock market. Conclusions. Changes in the emotional tonality of news and social media posts about COVID-19 impacted the stock market of the Russian Federation. The models enabled to prove that in a volatile economy, not only the information published about the coronavirus is significant for the stock market, but also the dynamics of the number of cases.

The sanctions regime for doing business in the securities and collective investments market

Restrictions on the Russian financial sector by foreign states, their associations and international organizations, as well as retaliatory measures on the part of Russia, in their entirety, can be described as a sanctions regime for doing business in the securities and collective investments market. The article reveals the main content of these sanctions restrictions and retaliatory measures. The sanctions regime is intended to become the basis for reviewing a number of principles of the organization and functioning of the securities and collective investments market. The restructuring of the international financial center established in Russia is required, based on the presumption that there is a risk of sudden unfriendly actions on the part of any of the foreign states or financial institutions, even if they are friendly as of today. Emphasis should be placed on the development of national institutions of the securities market and collective investments, which should largely be replaced by relevant foreign institutions. The principle of openness and transparency of the Russian stock market is subject to revision.

How Does the Russian-Ukrainian War Rock Stock and Commodity Markets? Fresh Insights from Joint Network-Connectedness Analysis

ABSTRACT The outbreak of the war in Ukraine has had a profound and far-reaching impact on the global economy, with notable repercussions observed in stock markets, and particularly pronounced effects evident in commodities markets. This paper examines the connectedness network among 27 NATO stock markets, Russian stock market and a set of three commodity indices (energy, precious metals, and agricultural commodities) over the period 2017-2023. The empirical strategy consists of time and time-frequency connectedness metrics. The empirical results reveal that the connectedness structure has shifted during the Russian-Ukrainian conflict. Moreover, hit by a series of Western sanctions, Russia’s stock market appears to be the most isolated of the considered markets during the war period. Furthermore, the energy, agricultural and precious metals commodities seem to be efficient hedging instruments for investors in the stock markets of the NATO countries during the war period.

Impact of Russia–Ukraine conflict on Russian financial market: Evidence from TVP-VAR and quantile-VAR analysis

This study aims to analyze the repercussions of the Russia–Ukraine conflict on the Russian financial market, focusing on the main stock market and sectorial stock indices. High-frequency hourly data from September 12, 2021, to April 29, 2022, covering the period before and after the outbreak of conflict, is utilized for analysis. The empirical investigation employs the TVP-VAR and Quantile-VAR connectedness approaches. Our findings indicate a significant impact of the conflict on the Russian stock market, leading to increased market risk during the event period. Notably, certain sectors, including oil and gas, utilities, metals & mining, financials, consumer goods, and services exerted more influence on other sectors, while chemicals, transport, and telecoms were influenced by other sectors. These insights are crucial for comprehending the financial implications of the ongoing conflict on the local economy, providing valuable guidance to portfolio managers, investors, and policymakers in devising effective financial strategies.

СТОХАСТИЧЕСКОЕ ДОМИНИРОВАНИЕ В АКЦИЯХ ИННОВАЦИОННЫХ КОМПАНИЙ НА РОССИЙСКОМ ФОНДОВОМ РЫНКЕ

During the period of significant economic changes, the role of the state in the economy is strengthening, while the need for efficient resource allocation remains, which is characteristic of the market mechanism. The criterion for determining preferences based on second-order stochastic dominance, considered in the paper, allows the planner to identify the most preferred innovative companies for conducting appropriate policies. The result of the study is a hierarchy of preferences for a set of innovative companies represented on the Russian stock market. The article presents a calculation algorithm for series of different lengths generated by a stochastic process. An overview of the organized capital market for innovative companies is presented.

COVID-19 and extreme risk spillovers between oil and BRICS stock markets: A multiscale perspective

This paper uses the VMD-Copula-ΔCoVaR model to examine the dynamic characteristics of extreme risk spillovers between the oil market and BRICS stock markets during COVID-19 from a multiscale perspective. Using daily data from January 1, 2019 to December 31, 2021, the empirical results show that: (1) Bidirectional extreme risk spillovers exist between oil and BRICS stock markets for the original return series, short-term, medium-term, and long-term components, with BRICS stock markets generally exporting higher risk to the oil market than they receive. (2) The magnitude of risk spillovers at all time scales presents an inverted V-shaped pattern during COVID-19, increasing with the worsening of the pandemic and the oil price war, then decreasing after various countermeasures. (3) Following the COVID-19 vaccine rollout, the long-term spillovers between oil and stock markets in countries such as Brazil, China, and South Africa have returned to or even fallen below pre-pandemic levels. Conversely, the magnitude of short-term and medium-term risk spillovers generally remains higher than pre-COVID-19 levels. (4) The short- and medium-term components are the primary contributors to overall risk spillovers, whereas the long-term component contributes the least. (5) Oil and the Russian stock market exhibit the strongest risk spillovers at all time scales, while oil and the Chinese stock market have the weakest risk spillovers. Overall, our findings suggest that investors and policymakers should consider the impact of the COVID-19 pandemic and various countermeasures on the multiscale spillovers between oil and BRICS stock markets to optimize decision-making and maintain financial market stability.

Digitalization and development of the Russian stock market: impact of household consumption

In developed economies the opportunities of the stock market are widely used to solve practical issues of financial security of the economy. The advantage of financial provision of the economy at the expense of the possibilities of the stock market in com parison with the so-called bank financing is obvious. This topic takes a special urgency for rather young market economy of Russia. Household savings occupy a special place in the implementation of investment activities. In the most developed countries, the population is traditionally regarded as the leading provider of financial resources for the national economy. What indicators and factors are need to be managed to achieve sustainable development of the domestic stock market in the era of digitalization? How are consumption and the stock market related? This paper will build an econometric model to help answer these two questions.

The Russia-Ukraine War and Eastern European Stock Markets

We examine the causal relationships and extreme return co-movements between the Russian stock market and adjacent Eastern European (EE) stock markets before and after the recent Russia-Ukraine war. Considering that the EE stock markets are regarded as a group of emerging markets in the same region for the purpose of investment, we are motivated to identify any change in their relationships after the war because this would be critical in terms of stock portfolio diversification. We find that while the war has a positive impact on the causal relationship between the Russian stock market and the Bulgarian stock market, it has a negative impact on the causal relationships between the Russian stock market and the other EE stock markets. Also, extreme return co-movements between the Russian stock market and the Bulgarian stock market are strengthened after the war whereas those between the Russian stock market and the other EE stock markets are weakened after the war. Our study is expected to provide new insight into stock market participants

Digital premium in Russian equities’ prices

Subject. The article addresses risk premium on share price of companies undergoing digital transformation of their business, and investigates the stock market of Russian companies. Objectives. The aim is to develop a methodological approach to estimating the digital premium in Russian companies' share prices to design factor investing strategies, given the level of digital maturity of issuers. Methods. The main method of the study is an analysis of return on equity of over fifty domestic issuers from eleven sectors of the Russian economy, taking into account the distribution of issuers into two portfolios, according to their level of digital maturity. Results. As a result of the analysis, we created a unique digital maturity index and rated domestic issuers based on their level of digital maturity. This index enables to compare companies by the level of digital maturity and assess the effectiveness of digital transformation. Conclusions. The study found higher returns for shareholders of digitally transformed companies. Meanwhile, a number of companies still have a negative attitude towards the digitalization process due to high cost of transformation processes and risks. The proposed risk factor of digital premium provides a good explanation of reasons for excessive return on shares of Russian companies, and a more accurate approach to asset pricing on the Russian stock market.

Using digital technologies in the stock market: The criminal law aspect

Under sanctions, digital services and products that are not affected by restrictions are of particular interest to unqualified investors of the Russian stock market. The possibility of illegal use of digital technologies in the stock market has not gone unnoticed by people with criminal intent. This article analyzes the already existing illegal practices in the stock market of using digital technologies and services, and also identifies criminal legal risks of their potential development in the future. The authors use general scientific methods of research as synthesis, analysis, induction, deduction, classification, as well as special methods (systematical, structural and dogmatical, as well as content analysis methods) based on a wide range of judicial practice. As a result, the authors formulate the following main areas of using digital technologies in the stock market for criminal purposes: 1) obtaining unauthorized access to users’ personal accounts; 2) organizing the activities of financial pyramids and illegal forex dealers; 3) fraudulent activity through the marketing of financial services by illegal financial market participants; 4) using artificial intelligence for the purposes of false trading. It has been established that the measures currently taken by supervisory and law enforcement agencies are not sufficient to protect unqualified investors from the criminal actions of malefactors. At the same time, the need to strengthen control over the use of digital technologies will require finding a balance between minimizing risks by government agencies and continuing to actively use new technologies on the Russian stock market.

Impact of monetary methods of economic regulation on fair pricing of shares in the Russian stock market

In the article, the author analyzes the Russian stock market, estimates the fair value of shares of domestic issuers and examines the impact on financial assets of the measures taken by the Central Bank of the Russian Federation within the framework of monetary policy. The fair value of securities is calculated on the basis of a constant dividend growth rate model, where the required return on equity is determined using the CAPM model. The results of the author’s comparative analysis of the fair value and market price of shares of Russian corporations show that securities on the Russian stock market are significantly undervalued. To eliminate the imbalances that have arisen in the financial market, the author suggests that the Central Bank of the Russian Federation implement a softer monetary policy, thus affecting the development of the domestic stock market and increasing the attractiveness of investments in securities of Russian corporations.

Race for Immunity: the Russian Stock Market during the COVID-19 Pandemic

ABSTRACT This paper evaluates the stock market performance in Russia during the COVID-19 pandemic from January 3, 2020, to April 30, 2021. The study shows daily abnormal returns of stocks declined on the day when the first coronavirus case was detected. The government’s actions in implementing lockdown restrictions and providing stimulus packages positively influenced the stock market. However, the early lifting of lockdowns sent a negative signal to investors. Despite the skepticism among the population toward the first coronavirus vaccine Sputnik V, the news of its registration, mass vaccination, and Russia’s “vaccine diplomacy” contributed to the stock market’s growth.

Evaluation of the cost of capital and the discount rate based on the Russian financial statistics

The cost of capital and the discount rate calculated on its basis are the key parameters in the financial modelling and assessment of investment projects’ economic efficiency. Therefore, the method for their evaluation is always a relevant issue for economists and financiers all over the globe. In conditions of unprecedent sanctions pressure this problem has gained special significance for Russian investors, for whom the assets denominated in ‘unfriendly’ currencies have ceased to be risk-free. The study aims to develop an algorithm for evaluating the cost of capital and calculating the discount rate based on ruble-denominated risk-free assets and Russian financial statistics. The methodological basis of the research is the theories of corporate finance and investment project design, as well as the portfolio theory. The statistics of the Russian stock market for 2003–2022 are studied using general scientific (systems analysis and synthesis) and econometric methods, as well as by adopting the Capital Asset Pricing Model (CAPM) and weighted average cost of capital (WACC). The paper suggests and tests a step-by-step algorithm for collecting and processing the Russian financial statistics to calculate the cost of capital and risk premiums to it. The findings prove that unsystematic risks should be assessed separately, rather than within the weighted average cost of capital, as well as propose a determined mechanism for this. The developed method allows avoiding the prohibitively high values of the cost of capital that arise during the use of foreign sources of information.

Analysis of Regional Transformations in the Russian Banking System

Recent trends in changes in the institutional characteristics of the banking system of the Russian Federation at the regional level indicate a decrease in the total number of structural units. At the same time, the expansion of large federal players into the regions of the country continues through the optimization of the network of branches and additional offices. These processes do not affect the activity of the banking business in the field of lending to the population and other banking services. The trends of increasing credit indebtedness of individuals against the background of a decline in real wages in regions of Russian Federation pose a danger of deterioration in the quality of life. Simultaneously with the reduction in the number of regional offices by banks with foreign participation, there is an increase in the number of branches of banks of the largest Russian financial market brokers due to the rapid growth in the activity of private investors in the Russian stock market.

Determinants of Dividend Payments of Russian Companies

The Russian stock market is one of the leaders in terms of dividend yield among developed and developing countries. Against this background, it is appropriate to study the determinants that affect the decisions on the implementation of payments and their amount. The literature on this topic in emerging markets in general and specifically in Russia has anumber of gaps and contradictions that determine the scientific novelty of the work – the analysis in regard to the impact on the probability of payments and on dividend yield is carried out simultaneously; contradictory determinants are examined.
 In emerging markets, the relationship between dividends and the age of members of the Board of Directors and the personal income tax rate on dividends is taken into account, and specifically in Russia – their relationship to the number of members of the Board of Directors, the ownership stake of the CEO and institutional shareholders, the company’s life cycle stage (LC), the dual role of the chairman of the Board of Directors and executive director. The study is conducted on the 2012–2019 data for a sample of 40 companies listed on the Moscow Exchange. The method incorporates two regression models – a linear one with random effects and a probit model. As a result of the analysis, the manifestation of the agencyeffect in the Russian market was confirmed by a significant positive dependence of the probability of payments on the dual role of the chairman of the Board of Directors and the executive director, the portion of shares held by the CEO, a significant negative relationship with the number of members of the Board of Directors and liquidity. The agency and behavioral effects are confirmed by a significant positive relationship between the probability of payments and the age of the members of the Board of Directors and a significant negative relationship with profitability. The influence of client effects is confirmed by a significant positive relationship between profitability and the personal income tax rate on dividends, as well as between the probability of payments and the share of institutions in ownership. It is also confirmed that companies that are mature in terms of the life cycle stage are more likely to pay dividends and do it more often. In general, there is a more significant influence of non-financial variables on the probability of payments and of financial variables on profitability.
 The results of the study can be used by private investors, banks, investment funds and brokerage companies to form expectations for companies’ dividend yield and the probability of payments with regard to the specifics of the Russian market.

War build-up and stock returns: evidence from Russian and Ukrainian stock markets

PurposeThis study examined the impact of war/conflict-related news on the Russian and Ukrainian stock markets in the build-up and beginning of the war that sparked in the year 2022.Design/methodology/approachIn order to examine the impact of war-related news on stock returns, data were gathered from the United States (US) and Russian stock indices, oil price and volatile index (VIX) from Yahoo.finance; Ukrainian stock values from pfts.ua website and daily related news retrieved from nexis.com were analysed. The data were gathered from January 1, 2022 to February 24, 2022. Seeming unrealated regressions (SUR) and exponential generalised autoregressive conditional heteroscedastic (EGARCH) models were carried out to determine the formulated correlations. This study controlled the oil price, US stock returns, Chicago Board Options Exchange (CBOE) VIX and difference in stock returns of Russia and Ukraine.FindingsThe results are presented two-fold: first, war-related news between the two countries enhanced volatility and caused a significant decline in the stock market indices for both countries. Second, the Russian stock market faced a steeper decline in the build-up and the actual beginning of the war than the Ukrainian stock market. Notably, the Russian markets feared the adverse economic consequences that stemmed from the sanctions the US and the Western world imposed.Research limitations/implicationsAs this study was based on early evidence, future studies with a longer window may provide better insights. This present study is restricted to the stock returns of the countries directly involved in the build-up towards war. Studies focusing on the impact of other asset classes, currencies, commodities and global stock markets might offer holistic insights.Practical implicationsThe study outcomes suggest that global portfolio investors should stay away from stock markets of the war-raged countries and equity markets in general, but instead look for safe-haven assets.Originality/valueThe paper evaluates stock markets' performance during the pre-war period, considering the context of this historical war between the neighbours. It is important to understand this issue as this war is subject to sanctions by the US and leads to a global supply chain crisis.