Why do investors still hope? The Soviet repudiation puzzle (1918-1919)
AbstractBased on an original database, this paper provides an empirical study of Tsarist bond prices reactions after their repudiation by the Soviets. For the two years following the repudiation two striking features of a representative Tsarist bond traded in Paris are highlighted: first, the price decline following the repudiation announcement was limited; second the price remained relatively high, and even increased. This is the so- called Soviet Repudiation Puzzle. We argue that the bondsâ persistent high relative value can be approached via the Peso problem hypothesis: prices are affected by expected events that never took place and thus remained unobservable. In the Russian case, several unusual events could have been expected: a dramatic change in the Russian attitude, due for instance to the Soviet overthrow or a takeover of part of the debt either by the French or by another government (most likely countries created from the former Russian Empire). In this respect, the Soviet Repudiation Puzzle appears as a multidimensional peso problem.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 03-010.RS.
Length: 40 p.
Date of creation: Oct 2003
Date of revision:
Publication status: Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)
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repudiation; sovereign debt; secession; Russia; Soviet; war; country break-up.;
Other versions of this item:
- Oosterlinck Kim, 2004. "Why Do Investors Still Hope? The Soviet Repudiation Puzzle (1918- 1919)," Economic History 0409002, EconWPA.
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
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