Geopolitical events and stock markets: Evidence from Vietnam during the Russia-Ukraine War

Abstract

This study examines the immediate impact of the Russia-Ukraine conflict on Vietnamese stock market volatility within a 40-day event window centred on February 24, 2022. Using data from 387 HOSE-listed firms, the findings reveal a pronounced psychological shock to investor sentiment, with abnormal returns dropping sharply at the onset of the conflict before showing signs of modest recovery. This pattern suggests that investors overreact to geopolitical uncertainty, even in an emerging market geographically distant from the event. Sectoral and firm-size variations were evident: finance and real estate experienced sharper declines, while energy stocks showed resilience consistent with global patterns. Smaller firms proved more vulnerable to shocks, whereas larger firms demonstrated relative stability. However, beyond these differences, the overarching result is that global political crises can trigger significant volatility spillovers in emerging markets with limited direct exposure to the crisis. The study highlights the crucial role of investor psychology in driving short-term fluctuations and provides significant policy implications. Regulators should strengthen legal frameworks, upgrade technical infrastructure, and design targeted support for small and medium enterprises to reduce systemic risk. By contextualising geopolitical shocks within the dynamics of an emerging market, this research deepens understanding of how global conflicts reverberate across local financial systems.