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Investor sentiment and local bias in extreme circumstances: the case of the Blitz

Hudson, Robert; Urquhart, Andrew


Andrew Urquhart


© 2015 Elsevier B.V. This paper treats the Blitz, the bombing of Britain during World War Two, as a natural experiment which can provide insights into the effects of investor sentiment on stock returns. The period of the Blitz is very interesting in that one of the world's major financial centres was under regular and severe air attack, as were many other industrial and commercial centres. These conditions provide a unique opportunity to study both investor sentiment and local bias effects in extreme circumstances. We show that negative investor sentiment during the Blitz as a whole was not evident. However major bombings in London generate negative investor sentiment on stock returns while major bombings outside of London generate no negative investor sentiment on stock returns, which is consistent with local bias effects.

Journal Article Type Article
Publication Date 2016-01
Journal Research in international business and finance
Print ISSN 0275-5319
Electronic ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 36
Issue January
Pages 340-350
Keywords Stock returns; Sentiment; World War Two; Local bias
Publisher URL
Additional Information Authors' accepted manuscript of article published in: Research in international business and finance, 2016, V.36.


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