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We examine the behavior of the Russian stock market as one of the leading indices of economic health, reflecting investors’ expectations about future returns. The sample period includes the global financial crisis, a recovering period, and the recent crisis in the Russian economy 2014–2015.

We assume that the Russian stock market strongly depends on the global market, but the market is not fully integrated. This chapter investigates whether specific risk factors such as high dependence of the Russian economy on oil prices and currency volatility are priced in the Russian stock market, using International CAPM with time-variant parameters and conditional heteroskedasticity. The results show that the global financial crisis has had a profound negative impact on the Russian market, and that the expected return and liquidity has declined. The risk of investing in the Russian market is estimated as higher than in the developed market and even in other emerging markets after the global recession. We find that oil price exposure and currency risk to be priced in the Russian stock market and indicate that international investors require higher compensation for bearing these risks. The price of the currency risk has decreased since the implementation of the floating exchange rate regime by the Central Bank of Russia in 2014, but still significant.

Some opportunities to overcome the present stagnation and drive for a sustainable development are discussed.

This chapter considers scenarios for the development of the Russian economy in the medium term under the “new reality” conditions, with the latter implying a slowdown in China’s economic growth rate, lower commodity prices, rising geopolitical tensions, and the rapid development of digital technologies leading to the fourth scientific and technological revolution. The results of scenario calculations show that the implementation of the economic growth target scenario requires targeted efforts to increase human capital, increase investment in fixed assets and innovation, export diversification, and achieve perfection in the quality of political and economic institutions. Sustainable growth of 3% per year in the medium term is possible only with the restructuring of the economy; otherwise, even with favorable conditions in the commodity markets and higher efficiency of the existing economic system, it is impossible to achieve high rates of economic growth necessary to significantly improve the quality of life.