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

Urquhart, Andrew; Hudson, Robert

Abstract

© 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.

Citation

Urquhart, A., & Hudson, R. (2016). Investor sentiment and local bias in extreme circumstances: the case of the Blitz. Research in international business and finance, 36(January), 340-350. https://doi.org/10.1016/j.ribaf.2015.09.010

• Journal Article Type: Article
• Acceptance Date: Sep 8, 2015
• Online Publication Date: Sep 14, 2015
• Publication Date: 2016-01
• Deposit Date: Oct 12, 2015
• Publicly Available Date: Nov 23, 2017
• Journal: Research in international business and finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 36
• Issue: January
• Pages: 340-350
• DOI: https://doi.org/10.1016/j.ribaf.2015.09.010
• Keywords: Stock returns; Sentiment; World War Two; Local bias
• Public URL: https://hull-repository.worktribe.com/output/379561
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0275531915300167
• Additional Information: Authors' accepted manuscript of article published in: Research in international business and finance, 2016, V.36.
• Contract Date: Nov 23, 2017