The Impact of the Russian-Ukrainian Crisis on the Nordic Healthcare Equities

Abstract

The impact of geopolitical crises on financial markets has always been relevant in investment analysis, and the case of the Russian-Ukrainian crisis is not an exception. Using a combination of short- and long-horizon event-study methods and GARCH-based volatility modelling, the reaction of a portfolio of se-lected Nordic healthcare-related firms and a Nordic healthcare sector index to the crisis was analyzed. Additionally, their performance was compared with more cyclical sectors, such as financials and ener-gy. The primary objective was to assess whether major political events in 2022 had a negative impact on the sector’s stock performance. Furthermore, supporting objectives included comparing with more cyclical sectors and evaluating pre- and post-war changes in volatility dynamics.

Quantitative methodology of event study method and GARCH (1,1) volatility model has been applied to investigate the selected objectives. The eight pre-determined event dates, which were war-related announcements, were used in the analysis. The OMX Nordic 40 served as a market benchmark, and the Nordic Health Care Index served as a sector benchmark. An equal-weight portfolio of eight major healthcare-related firms was constructed.

The short-horizon results present only limited support for statistically significant abnormal returns around the major war-related announcement dates. A few pre- and post-event days show significant average abnormal returns, but the corresponding short-window cumulative abnormal returns are gen-erally indistinguishable from zero. In contrast, long-horizon cumulative abnormal returns point to eco-nomically meaningful and persistent effects, as the equal-weighted healthcare portfolio exhibits sus-tained positive abnormal performance, while the healthcare sector index underperforms over the 360-day horizon. Sector comparisons reveal that Nordic healthcare reacted differently from the mar-ket, energy, and financial sectors. Energy and financials behave as high-beta “winners” of the commod-ity and rate shock, whereas healthcare remains low-beta and displays a mixed pattern, with the sector index maintaining positive alpha but the selected portfolio underperforming. The GARCH(1,1) esti-mates and volatility diagnostics further indicate a structural shift to a more volatile and persistent regime after the invasion, with volatility spikes around the event and a slow decay back toward lower levels. In conclusion, the war altered both performance and risk dynamics in Nordic healthcare equi-ties in a persistent way.