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The war puzzle: contradictory effects of international conflicts on stock markets

Brune, Amelie ; Hens, Thorsten ; Rieger, Marc ; Wang, Mei

In: International Review of Economics, 2015, vol. 62, no. 1, p. 1-21

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    Titel
    • The war puzzle: contradictory effects of international conflicts on stock markets
    Autor
    • Brune, Amelie. Department of Banking and Finance, University of Zurich, Zurich, Switzerland
    • Hens, Thorsten. Department of Banking and Finance, University of Zurich, Zurich, Switzerland
    • Rieger, Marc. Department IV, University of Trier, Trier, Germany
    • Wang, Mei. Finance and Accounting Group, WHU Otto Beisheim School of Management, Vallendar, Germany
    Dokumententyp
    • Postprint
    Sprache
    • Englisch
    Veröffentlicht in
    • International Review of Economics, 2015, vol. 62, no. 1, p. 1-21. Springer Berlin Heidelberg
    Andere elektronische Ausgabe
    OAI-PMH-ID
    • oai:doc.rero.ch:332519
    Summary
    We study stock market reactions to large international military conflicts since World War II. Using a news analysis proxy for the estimated likelihood that a conflict will result in a war, we find that an increase in the war likelihood tends to decrease stock prices, but the ultimate outbreak of a war increases them. In cases when a war starts surprisingly, however, the outbreak of a war decreases stock prices. We show that this puzzle cannot be explained by risk or ambiguity aversion or by expectations about a quick end of the war.