Political News and Stock Prices: The Case of Saddam Hussein Contracts

Posted: 14 Aug 2003

See all articles by Yakov Amihud

Yakov Amihud

New York University - Stern School of Business

Avi Wohl

Tel Aviv University - Coller School of Management

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Abstract

This paper studies the association between the market's expectations of Saddam Hussein's fall from power, as reflected in "Saddam contract" prices, and stock prices, oil prices and exchange rates. During the war, a rise in the probability of Saddam's fall, which also indicated a speedy end to the war, was positively and significantly associated with stock prices, strengthened the dollar against the Euro, and lowered oil prices. Before the war, a rise in the probability of Saddam's fall, which may also have indicated the probability of a costly war breaking out, lowered stock prices, which adjusted gradually to this information.

Keywords: political risk, war and the stock market, war and exchange rates

JEL Classification: G14, G15

Suggested Citation

Amihud, Yakov and Wohl, Avi, Political News and Stock Prices: The Case of Saddam Hussein Contracts. Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=434302

Yakov Amihud (Contact Author)

New York University - Stern School of Business ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
212-998-0720 (Phone)
212-995-4233 (Fax)

Avi Wohl

Tel Aviv University - Coller School of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 6409051 (Phone)

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