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Predicting institutional collapse: stock markets, political violence and the Spanish Civil War, 1920-36

Author

Listed:
  • Stefano Battilossi

    (Universidad Carlos III Madrid)

  • Stefan O. Houpt

    (Universidad Carlos III Madrid)

Abstract

"Could the outbreak of the Spanish civil war have been predicted? We explore this issue by looking at the behaviour of Spanish investors in the years that preceded the dramatic events of July 1936. The paper tests the ability of financial markets to assess ex ante the risk of extreme political events which may have posed a serious threat to the survival of the existing economic and institutional order, such as a revolution or an armed internal conflict. To this end we have reconstructed two original time series: an index of the Bilbao stock exchange and the yields of government bonds at weekly frequency from January 1920 to July 1936. The paper tests for structural breaks in the mean and variance of the two series, and explores the impact of political events on investors’ expectations by using an event study approach."

Suggested Citation

  • Stefano Battilossi & Stefan O. Houpt, 2009. "Predicting institutional collapse: stock markets, political violence and the Spanish Civil War, 1920-36," Working Papers 9002, Economic History Society.
    • Handle: RePEc:ehs:wpaper:9002
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    structural breaks; civil wars; financial asset markets; economic history;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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