ECONOMIC AND SOCIO-POLITICAL FORCE MAJEURE: A STUDY OF THE UKRAINIAN STOCK MARKET REACTION
Abstract
The paper analyzes the reactions on the Ukrainian stock market to force majeure events of an economic and socio-political nature. Unforeseen events are regards as force majeure events, which can not be taken into account in the value of assets in the stock market in advance. It has been established that, as a result, conditions for obtaining anomalous profit market participants may be created, until information on force majeure will be absorbed by the stock market. In this context, force majeure is seen as an anomaly of the hypothesis of effective markets. Among the most significant economic events, a number of corporate bankruptcies and cyberattacks were taken into account, and among socio-political force majeures – revolutionary, military-political events and terrorist acts. On the basis of daily data for the main index of the stock market of Ukraine (PFTS) for the period from 01.01.1997 to 31.12.2018, a hypothesis was checked regarding whether or not the force majeure events create temporary market anomalies and whether there are profitable trading strategies based on their use. The methodological basis for testing was not only the traditional t-criterion of the Student (as a hypothesis test method) but also cumulative accumulated income methods as one of the methods of studying events and trading simulations. According to the results of the audit, the Ukrainian stock market reacts very quickly to economic and socio-political force majeures and absorbs information about them. Negative profitability of the PFTS index was observed only on the day of the occurrence of a force majeure event. Despite the existence of the revealed model of the stock market reaction to force majeure events (namely, price reduction on the day of the event), it is not possible to build profitable trading strategies based on this model, since the results of simulation of these strategies do not differ from those generated random trade.
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