Stocks and shocks

How do stock markets respond to extreme events? This paper analyzes the reaction of stock markets in four industrialized economies (Italy, the Netherlands, Sweden, the US) to ten major international crises. We employ an event study to investigate whether the stock exchanges react differently with r...

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Bibliographic Details
Main Authors: Bert Scholtens, Marélie Steensma
Format: Article
Language:English
Published: Associazione Economia civile 2012-04-01
Series:PSL Quarterly Review
Subjects:
Online Access:https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/9914
Description
Summary:How do stock markets respond to extreme events? This paper analyzes the reaction of stock markets in four industrialized economies (Italy, the Netherlands, Sweden, the US) to ten major international crises. We employ an event study to investigate whether the stock exchanges react differently with respect to extreme events such as the Chernobyl nuclear power plant meltdown, the Gulf War, the peso crisis, the Kosovo War or the 11/9 attack on the US. There is no substantial evidence that markets react differently to extreme events than to more ordinary news. We have significant evidence that there is no standard reaction of stock markets to extreme events.   JEL Codes: G12, G14, G15
ISSN:2037-3635
2037-3643