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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | The war puzzle: Contradictory effects of international conflicts on stock markets |
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| Authors |
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| Institution | University of Zurich |
| Series Name | NCCR FINRISK |
| Number | 688 |
| Date | 2011 |
| Abstract Text | We study a number of large international military conflicts since World War II where we establish a news analysis as a proxy for the estimated likelihood that the conflict will result in a war. We find that in cases when there is a pre-war phase, 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 as a surprise, the outbreak of a war decreases stock prices. We show that this paradox cannot be explained by uncertainty about investment decisions, nor by the expectation about a quick end of the war or ambiguity aversion. A connection of this puzzling phenomenon to mean-variance preferences of investors is suggested. |
| Official URL | https://www.zora.uzh.ch/49787/ |
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| Other Identification Number | merlin-id:3887 |
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