NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effects of War Risk on U.S. Financial Markets

Roberto Rigobon, Brian Sack

NBER Working Paper No. 9609
Issued in April 2003
NBER Program(s):   IFM   AP

This paper measures the effects of the risk of war on nine U.S. financial variables using a heteroskedasticity-based estimation technique. The results indicate that increases in the risk of war cause declines in Treasury yields and equity prices, a widening of lower-grade corporate spreads, a fall in the dollar, and a rise in oil prices. This war risk factor' accounted for a considerable portion of the variance of these financial variables over the ten weeks leading up to the onset of war with Iraq.

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Published: Rigobon, Roberto & Sack, Brian, 2005. "The effects of war risk on US financial markets," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1769-1789, July.

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