The price reaction and investment exposure of equity funds: evidence from the Russia–Ukraine military conflict

PurposeThe purpose of this paper is to assess the impact of the Ukraine–Russia military conflict on the returns and investment flows of equity funds across multiple countries.Design/methodology/approachUsing a comprehensive sample of 1,281 equity funds in 40 countries. The countries were segregated into conflict states, members of NATO, and those which abstained from voting on the UN resolution on March 2, 2022. The authors employ a GARCH-based event study and estimate CARs for t−5, t−3, t, t + 3, and t + 5 event windows. Further, the authors use panel estimation to assess the link between the CARs and the investment exposure of the sample funds.FindingsThe findings highlight an adverse reaction of mutual funds in Russia, Ukraine, and the NATO States. On the contrary, the mutual funds in the countries that abstained during the voting on the UN resolution on March 2nd posted positive abnormal returns. Similarly, the investment exposure towards the conflicted countries and NATO states is unfavorable except for the abstained countries.Originality/valueThis is the primary study to evaluate the impact of the recent geopolitical tensions on mutual funds domiciled across various geographical locations.