Impact of the Russia-Ukraine war on the stock performance of the defence industry: An event study analysis

The paper endeavors to appraise the effects of the Russia-Ukraine battle on defence industries by employing event study methodology. The normal return was determined by applying the Fama & French three-factor model and the market model. The abnormal return was found by computing the gap between the normal return and the realized return. The daily returns of 28 arms manufacturing firms listed on multiple stock exchanges in New York, London, Paris, Frankfurt, Milan, Stockholm, Istanbul, BATS Europe, Tel Aviv, and the Indian Stock Exchanges (NSE and BSE) were collected for the period from 1 May 2021 to 3 March 2022. The 180 trading-day estimation window ranges from 1 May 2021 to 14 January 2022 and 11 trading-day event window ranges from 16 February 2022 to 3 March 2022. Both parametric standard t-tests and non-parametric generalized rank tests were applied for hypothesis testing. The cumulative average abnormal return of 20 out of 28 firms was found to be positive and statistically significant. The outcome demonstrates that the war had a beneficial effect on the valuation of the defence industry.