Stock Market Wealth Effects in Emerging Economies of Eastern Europe: Evidence from Russia and Ukraine

Ramiz Rahmanov


The article estimates the stock market wealth effects in Russia and Ukraine and attempts to determine whether institutional differences between Russia and Ukraine and both non-EU and EU Eastern European countries can explain differences in the significance and magnitudes of their wealth effects. Employing the VECM, I find that in the long run, in Russia, the stock market wealth effect is statistically significant at the 5% level, while in Ukraine, it is statistically insignificant. In particular, it is estimated that a 10% increase in stock market wealth increases household consumption by 0.8% in Russia. The insignificant wealth effect estimated for Ukraine accords with its relatively inefficient institutions, whereas, in Russia, the wealth effect seems to be indifferent to inefficient institutions due to the offsetting effect of the relatively large stock market.

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