Risk-Adjusted Performance and Recovery of Warsaw Stock Exchange Sector Indices: A Five-Year Analysis

Abstract

Purpose of the study: This study compares the return, risk and recovery profiles of sector indices on the Warsaw Stock Exchange from 2021 to 2025. It also examines how the sectors reacted to Russia's full-scale invasion of Ukraine on 24 February 2022 and whether their immediate response corresponded to their subsequent investment performance. Methodology: The sample contains the broad WIG benchmark and 13 sector total-return indices with 1,250 aligned daily observations. Annual and cumulative returns, compound annual growth, variance, annualised volatility, Sharpe ratios, maximum drawdown and recovery time are calculated. A market-model event study estimates abnormal returns over [0], [0,+5] and [0,+20] windows. Main findings: WIG-banki (banking) produced the highest cumulative return, 302.4%, and the strongest Sharpe ratio, 0.90. WIG-leki (pharmaceuticals) lost 39.1% and recorded a 70.4% maximum drawdown. Every sector fell on the invasion date, but energy, mining, fuel and chemical indices generated positive abnormal returns over the [0,+20] window. Applications of this study: The results may assist investors, analysts and portfolio managers who use sector indices for allocation, benchmarking and risk control. They show why terminal return should be evaluated together with volatility, maximum drawdown and the time required to recover a previous peak after a large geopolitical shock. Novelty/Originality of this study: The article provides an internally consistent five-year comparison of WSE sector indices and separates three phenomena that are often conflated: the event-day shock, the subsequent short-window market adjustment and the full-period drawdown-recovery cycle.