Scuttle for Shelter: Investor Flight-to-Safety and Political Uncertainty during the Spanish Second Republic

39 Pages Posted: 13 Oct 2020 Last revised: 23 Sep 2021

See all articles by Stefano Battilossi

Stefano Battilossi

Universidad Carlos III de Madrid

Stefan O. Houpt

Universidad Carlos III de Madrid

Gertjan Verdickt

KU Leuven, Department Accounting, Finance and Insurance

Date Written: September 20, 2021

Abstract

The Spanish Second Republic was a unique experiment of democratization in interwar Spain, which was characterized by extreme levels of political uncertainty. In response to this uncertainty, we find that investors sold stocks in favor of government bonds. In fact, political uncertainty had a negative effect on the aggregate stock market index, a positive effect on stock market volatility, and significant differences in the cross-section of stock return, consistent with their exposure to the uncertainty. This suggests that Spanish investors did not seem to perceive a soviet-style social revolution as a credible threat.

Keywords: Political uncertainty, Regime switches, Spain, Great Depression

JEL Classification: N2, N23, G11

Suggested Citation

Battilossi, Stefano and Houpt, Stefan O. and Verdickt, Gertjan, Scuttle for Shelter: Investor Flight-to-Safety and Political Uncertainty during the Spanish Second Republic (September 20, 2021). Available at SSRN: https://ssrn.com/abstract=3679698 or http://dx.doi.org/10.2139/ssrn.3679698

Stefano Battilossi (Contact Author)

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Stefan O. Houpt

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Getafe, Madrid 28903
Spain

Gertjan Verdickt

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://www.verdickt.eu

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
391
rank
481,553
PlumX Metrics