Open AccessWar And Peace: The Reaction Of Defense Stocks
Author(s) -
Daniel Shapiro,
Lorne N. Switzer,
Dino P. N. Mastroianni
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v15i3.5668
Subject(s) - commit , portfolio , event study , economics , spanish civil war , capital (architecture) , monetary economics , business , financial economics , political science , law , history , context (archaeology) , archaeology , database , computer science
In this paper we examine the response of a portfolio of defense contractors to war- and peace-related events. An event-study methodology is employed, and GARCH estimates of abnormal returns suggest that on balance the defense portfolio responds positively to war-related announcements and negatively to peace-related announcements. A cross-sectional analysis of the abnormal returns to firms in the Gulf War indicates that larger abnormal returns are associated with R&D intensive firms in concentrated industries, while lower abnormal returns are associated with firms that commit to above-average levels of capital expenditures.