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

Amelie Brune (), Thorsten Hens (), Marc Rieger () and Mei Wang ()

International Review of Economics, 2015, vol. 62, issue 1, 21 pages

Abstract: 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. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: International conflicts; War; Stock market reaction; News analysis; Behavioral finance; G11; G14; G19 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s12232-014-0215-7

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