Impact of the Russia-Ukraine War on Market Efficiency of Cryptocurrencies and G-20 Countries:

An Analysis via Fractal Theory

Abstract

The purpose of this research is to analyze the efficiency behavior of emerging, developed and cryptocurrency markets before and after the invasion of Ukraine. In methodological terms, a study was made of the multifractal properties and entropy of the series of returns in a 5-minute frequency from 02/14/2022 to 03/31/2022 of market indices of the G-20 countries and the 10 largest cryptocurrencies by market capitalization. It was possible to verify an increase in the degree of randomness of the series analyzed after the Russian invasion, meeting what was expected of an efficient market. However, none of the markets behaved completely at random, and the existence of positive long-term correlations in returns was identified, which became more expressive in developed countries. The cluster analysis, which revealed that after the invasion, the behavior of the markets became more homogeneous, indicating that geopolitical uncertainties have the ability to make the behavior of the markets converge in the short term. Therefore, investors should bear in mind the need to readjust their predictive models to suit new market behavior, as well as to reduce abnormal profitability expectations, given the greater degree of randomness in the markets.