Impact of the EU’s Sanctions on Russia and Russian Counter Sanctions on the Finnish Stock Market

Abstract

The purpose of the study is to investigate the impact of EU’s Russia sanctions as well as Russian counter sanctions announced during the Ukrainian crisis on Finnish stock market. Due to dubious actions in Ukraine, the EU has imposed several restrictive measures against Russia starting in 2014. As a response to sanctions imposed by the EU, Russian counter decided to execute restrictions of its own. The sanctions included limitations against different individuals, organizations and specific sectors.

The study focuses on four different sanctions announcements and examines if these events generate abnormal returns on the Finnish stock market. As a methodology, event study is applied. The daily stock returns are calculated from OMX Helsinki 25 stock index.

The results suggest that the Finnish stock market is affected by various sanctions announcements. The impact of the sanctions can be both positive and negative. Only one announcement did not have any impact on stock returns: Russian counter sanctions. On the other hand, the most significant results came from restrictions imposed by the EU against Russian financial institutions as well as some specific industries such as oil sector. This study shows that Finnish and Russian businesses are integrated and the activities against Russia can also affect the Finnish stock market.