The impact of behavioral finance biases affecting the portfolio management decisions and asset reallocations of large management companies in the Russia - Ukraine War (Q4 2021 – Q2 2024)

Abstract

This research analyzes how the large management companies, BlackRock, Vanguard, and State Street, adjusted their portfolios during the Russia-Ukraine war and assesses the extent to which these reallocations reflected behavioral finance biases. Using a mixed-method approach, the study combines Qualitative evidence from publicly available statements and Quantitative information extracted from the 13F reports presented to the SEC from Q4 2021 to Q2 2024. The findings show that the large management companies reallocated their Assets Under Management in a similar pattern. Their portfolios experienced a sharp contraction in 2022 followed by a recovery from early 2023. Interpreted through behavioral finance, the analysis shows that uncertainty, geopolitical risk, and market stress correlate with behavioral finance biases such as ambiguity aversion, loss aversion and herding, shaping how large management companies adjusted their portfolios during the Russia-Ukraine war.