War And Peace: The Reaction Of Defense Stocks

Daniel M. Shapiro · Lorne N. Switzer · Dino P. N. Mastroianni

33 citations0/0 files storedJournal of Applied Business Research (JABR)

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Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Market Dynamics and Volatility

Abstract

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.

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2022The budgets of wars: Analysis of the U.S. defense stocks in the Post-Cold War era

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