The economic effects of violent conflict: Evidence from asset market reactions
This article studies the effects of conflict onset on asset markets applying the event study methodology. The authors consider a sample of 101 internal and inter-state conflicts during the period 1974-2004 and find that a sizeable fraction of them has had a significant impact on stock market indices, exchange rates, oil and commodity prices. This fraction is inconsistent with pure chance, that is, with the selected probability of type-I errors in our tests of statistical significance. The results suggest that, on average, national stock markets are more likely to display positive than negative reactions to conflict onset. When the authors distinguish between internal and inter-state conflicts, they find that the fraction of significant results is higher for international conflicts. When the authors classify events according to the region where they occur, they find that Asia and the Middle East are the regions where conflicts tend to have the strongest effects. Finally, the article reports evidence that abnormal returns would have accrued to investors systematically exploiting conflict onset to implement conflict-driven strategies. Results are robust to selecting a subset of high-intensity conflicts and to expanding the time window over which conflict events are defined. The findings of the article confirm the economic importance of the effects of conflicts on asset markets.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999.
"The Quality of Government,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 15(1), pages 222-279, April.
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, "undated". "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
- Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
- Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-573, October.
- Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
- Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
- Rigobon, Roberto & Sack, Brian, 2005. "The effects of war risk on US financial markets," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1769-1789, July.
- Roberto Rigobon & Brian Sack, 2003. "The Effects of War Risk on U.S. Financial Markets," NBER Working Papers 9609, National Bureau of Economic Research, Inc.
- Roberto Rigobon & Brian P. Sack, 2003. "The effects of war risk on U.S. financial markets," Finance and Economics Discussion Series 2003-18, Board of Governors of the Federal Reserve System (U.S.).
- Rigobon, Roberto & Sack, Brian P., 2003. "The Effects of War Risk on U.S. Financial Markets," Working papers 4417-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Massimo Guidolin & Eliana La Ferrara, 2007. "Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?," American Economic Review, American Economic Association, vol. 97(5), pages 1978-1993, December.
- Guidolin, Massimo & La Ferrara, Eliana, 2004. "Diamonds are Forever, Wars are Not: Is Conflict Bad for Private Firms?," CEPR Discussion Papers 4668, C.E.P.R. Discussion Papers.
- Massimo Guidolin & Eliana La Ferrara, 2006. "Diamonds are forever, wars are not. Is conflict bad for private firms?," Working Papers 2005-004, Federal Reserve Bank of St. Louis.
- Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
- Collier, Paul & Hoeffler, Anke, 2000. "Greed and grievance in civil war," Policy Research Working Paper Series 2355, The World Bank.
- Paul Collier & Anke Hoeffler, 2004. "Greed and Grievance in Civil War," Development and Comp Systems 0409007, EconWPA.
- Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
- Alberto Abadie & Javier Gardeazabal, 2001. "The Economic Costs of Conflict: A Case-Control Study for the Basque Country," NBER Working Papers 8478, National Bureau of Economic Research, Inc.
- Abadie, Alberto & Gardeazabal, Javier, 2001. "The Economic Costs of Conflict: A Case-Control Study for the Basque Country," Working Paper Series rwp01-048, Harvard University, John F. Kennedy School of Government.
- repec:hrv:faseco:30747160 is not listed on IDEAS
- Justin Wolfers & Eric Zitzewitz, 2009. "Using Markets to Inform Policy: The Case of the Iraq War," Economica, London School of Economics and Political Science, vol. 76(302), pages 225-250, 04.
- Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
- José Garcia Montalvo & Marta Reynal-Querol, 2004. "Ethnic polarization, potential conflict and civil wars," Economics Working Papers 770, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2005. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:sae:joupea:v:47:y:2010:i:6:p:671-684. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)
If references are entirely missing, you can add them using this form.