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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 489:
How Government Bond Prices Reflect Wartime Events. The Case of the Stockholm Market.

Daniel Waldenström () and Bruno S. Frey ()

Abstract: How are political events reflected in financial asset prices? Break points in sovereign debt prices are analyzed for Denmark, Norway, Finland, Sweden, Germany and Belgium during 1930-1948, using unique data from the Stockholm Stock Exchange. Unlike in countries involved in WWII, this market was unregulated. The outbreak of World War II heavily depressed prices of government bonds. Countries which were occupied (Belgium, Denmark and Norway) or under attack (Finland) saw their debt depreciate substantially. The battle of Stalingrad turns out indeed to be a turning-point of the war. This approach represents a complementary quantitative method to analyze the impact of political events.

Keywords: Financial Markets; Economic History; WWII; Europe; Cliometrics; (follow links to similar papers)

JEL-Codes: F34; G15; N24; N44; (follow links to similar papers)

24 pages, January 17, 2002

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