The Effects of War Risk on U.S. Financial Markets

Roberto Rigobon and Brian P. Sack

No 4417-03, Working papers from Massachusetts Institute of Technology (MIT), Sloan School of Management

Abstract: This paper measures the effects of the risk of war on nine U.S. financial variables using a heteroskedasticity-based estimation technique. The results indicate that increases in the risk of war cause declines in Treasury yields and equity prices, a widening of lower-grade corporate spreads, a fall in the dollar, and a rise in oil prices. This "war risk factor" accounted for a considerable portion of the variance of these financial variables over the ten weeks leading up to the onset of war with Iraq.

Keywords: War Risk; Stock Markets; Monetary Policy; Identification; Heteroskedasticity (search for similar items in EconPapers)
Date: 2003-04-14
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Citations: View citations in EconPapers (1)

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http://hdl.handle.net/1721.1/1848 (application/pdf)

Related works:
Journal Article: The effects of war risk on US financial markets (2005)
Working Paper: The effects of war risk on U.S. financial markets (2003)
Working Paper: The Effects of War Risk on U.S. Financial Markets (2003)
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