Predicting institutional collapse: stock markets, political violence and the Spanish Civil War, 1920-36

Stefano Battilossi () and Stefan Houpt
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Stefano Battilossi: Universidad Carlos III Madrid

No 9002, Working Papers from Economic History Society

Abstract: "Could the outbreak of the Spanish civil war have been predicted? We explore this issue by looking at the behaviour of Spanish investors in the years that preceded the dramatic events of July 1936. The paper tests the ability of financial markets to assess ex ante the risk of extreme political events which may have posed a serious threat to the survival of the existing economic and institutional order, such as a revolution or an armed internal conflict. To this end we have reconstructed two original time series: an index of the Bilbao stock exchange and the yields of government bonds at weekly frequency from January 1920 to July 1936. The paper tests for structural breaks in the mean and variance of the two series, and explores the impact of political events on investors’ expectations by using an event study approach."

Keywords: "structural breaks; civil wars; financial asset markets; economic history" (search for similar items in EconPapers)
JEL-codes: G12 N24 (search for similar items in EconPapers)
Date: 2009-04
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