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How Government Bond Prices Reflect Wartime Events. The Case of the Stockholm Market

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  • Waldenström, Daniel

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Frey, Bruno S.

    ()
    (Institute for Empirical Economic Research, University of Zurch)

Abstract

How are political events reflected in financial asset prices? Break points in sovereign debt prices are analyzed for Denmark, Norway, Finland, Sweden, Germany and Belgium during 1930-1948, using unique data from the Stockholm Stock Exchange. Unlike in countries involved in WWII, this market was unregulated. The outbreak of World War II heavily depressed prices of government bonds. Countries which were occupied (Belgium, Denmark and Norway) or under attack (Finland) saw their debt depreciate substantially. The battle of Stalingrad turns out indeed to be a turning-point of the war. This approach represents a complementary quantitative method to analyze the impact of political events.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 489.

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Length: 24 pages
Date of creation: 17 Jan 2002
Date of revision:
Handle: RePEc:hhs:hastef:0489

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Web page: http://www.hhs.se/
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Keywords: Financial Markets; Economic History; WWII; Europe; Cliometrics;

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  1. Paolo Mauro & Yishay Yafeh & Nathan Sussman, 2001. "Emerging Market Spreads: Then Versus Now," OFRC Working Papers Series 2001fe03, Oxford Financial Research Centre.
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  7. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
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Cited by:
  1. Oosterlinck, Kim, 2003. "The bond market and the legitimacy of Vichy France," Explorations in Economic History, Elsevier, vol. 40(3), pages 326-344, July.
  2. Kim Oosterlinck, 2004. "Market microstructure and Nazi influence on the Paris stock exchange during WWII," Working Papers CEB 04-026.RS, ULB -- Universite Libre de Bruxelles.
  3. Leigh, Andrew & Wolfers, Justin & Zitzewitz, Eric, 2003. "What do Financial Markets Think of War in Iraq?," Research Papers 1785, Stanford University, Graduate School of Business.
  4. Kim Oosterlinck, 2003. "Why do investors still hope? The Soviet repudiation puzzle (1918-1919)," Working Papers CEB 03-010.RS, ULB -- Universite Libre de Bruxelles.
  5. Olga Christodoulaki & Jeremy Penzer, 2004. "News from London: Greek government bonds on the London Stock Exchange, 1914-1929," Economic History Working Papers 22335, London School of Economics and Political Science, Department of Economic History.
  6. Berkman, Henk & Jacobsen, Ben & Lee, John B., 2011. "Time-varying rare disaster risk and stock returns," Journal of Financial Economics, Elsevier, vol. 101(2), pages 313-332, August.

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