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Is peace priced in? Defense stock reactions to the Board of Peace

Author

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  • Wahyono, Budi
  • Trinugroho, Irwan
  • Boungou, Whelsy
  • Williams, Jonathan

Abstract

This study examines stock market reactions to the inauguration of the Board of Peace (BoP). Using an event-study framework that accounts for cross-sectional dependence, we analyze abnormal returns for 83 publicly listed aerospace and defense firms across 17 countries. We find a significant pre-event run-up, consistent with early market anticipation. At the announcement, returns diverge across firms, generating a membership premium: firms from member countries experience positive abnormal returns, while non-members do not. Apparent sectoral differences are largely explained by this membership composition rather than intrinsic industry effects. Overall, the findings highlight the role of political alignment in shaping market responses to new geopolitical institutions.

Suggested Citation

  • Wahyono, Budi & Trinugroho, Irwan & Boungou, Whelsy & Williams, Jonathan, 2026. "Is peace priced in? Defense stock reactions to the Board of Peace," Economics Letters, Elsevier, vol. 265(C).
    • Handle: RePEc:eee:ecolet:v:265:y:2026:i:c:s0165176526002120
    DOI: 10.1016/j.econlet.2026.113018
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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