The Economic Effects of Violent Conflict: Evidence from Asset Market Reactions

Guidolin, Massimo; La Ferrara, Eliana

doi:10.2139/ssrn.825889

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The Economic Effects of Violent Conflict: Evidence from Asset Market Reactions

30 Pages Posted: 25 Oct 2005

See all articles by Massimo Guidolin

Massimo Guidolin

Bocconi University, Dept. of Finance; Bocconi University - CAREFIN - Centre for Applied Research in Finance

Eliana La Ferrara

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); Centre for Economic Policy Research (CEPR)

Date Written: October 2005

Abstract

This paper studies the effects of conflict onset on asset markets applying the event study methodology. We consider a sample of 112 conflicts during the period 1974-2004 and find that a sizeable fraction of them had a significant impact on stock market indices and on major commodity prices. Furthermore, our results suggest that we are more likely to see investor reactions in response to conflicts that occur in highly polarized settings, possibly because the expected duration and intensity of the conflict is higher.

Keywords: Conflict onset, Event study, Asset markets, Polarization

JEL Classification: G14, P16

Suggested Citation: Suggested Citation

Guidolin, Massimo and La Ferrara, Eliana, The Economic Effects of Violent Conflict: Evidence from Asset Market Reactions (October 2005). Available at SSRN: https://ssrn.com/abstract=825889 or http://dx.doi.org/10.2139/ssrn.825889