The Zelensky Moment: Arms, Investments and the Russian Invasion

37 Pages Posted: 1 Dec 2023 Last revised: 9 Jan 2024

See all articles by Martijn Adriaan Boermans

Martijn Adriaan Boermans

De Nederlandsche Bank

Rients Galema

Utrecht University - School of Economics

Auke Plantinga

University of Groningen

Bert Scholtens

University of Groningen - Department of Finance & Accounting

Date Written: November 24, 2023

Abstract

We analyze the determinants of European portfolio investments in the international arms industry. We explore a novel database from the ECB with portfolio holdings of investors from 26 countries in the European Union to investigate the role of geographical and political factors in relation to the prolonged conflict between Russia and the Ukraine. We utilize the former Soviet countries, countries that once were part of Yugoslavia, and signatories of the Warsaw Pact, military defense budgets, Google trend, and geographical proximity indicators to understand which factors shape investors’ investments in the arms industry. Using a differences-in-differences approach, we find that following the election of Mr. Zelensky and subsequent political tensions, investors in countries that once were under direct influence of the Soviet Union have substantially increased their holdings in arms stocks as compared to those in other European countries. We establish that especially retail investors show a pronounced response.

Keywords: Arms industry, Stock market, Portfolio holdings, Proximity, Ukraine, EU

Suggested Citation

Boermans, Martijn Adriaan and Galema, Rients and Plantinga, Auke and Scholtens, Bert, The Zelensky Moment: Arms, Investments and the Russian Invasion (November 24, 2023). Available at SSRN: https://ssrn.com/abstract=4643326 or http://dx.doi.org/10.2139/ssrn.4643326

Martijn Adriaan Boermans (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Rients Galema

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Auke Plantinga

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen
Netherlands
+31 50 363 3685 (Phone)

HOME PAGE: http://www.aukeplantinga.com

Bert Scholtens

University of Groningen - Department of Finance & Accounting ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

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