FIN-03-019

Political News and Stock Prices: The Case of Saddam Hussein Conacts

June 2003

Yakov Amihud and Avi Wohl

ABSTRACT
This paper studies the association between the market’s expectations of Saddam Hussein’s fall from power, reflected in "Saddam conact" prices, and stock prices, oil prices and exchange rates. During the war, a rise in the probability of Saddam’s fall, which also indicated a speedy end to the war, was positively and significantly associated with stock prices, sengthened the dollar against the Euro, and lowered oil prices. Before the war, a rise in the probability of Saddam’s fall, which may have also indicated the probability of a costly war breaking out, lowered stock prices, which adjustment gradually to this information.

Yakov Amihud
Institution: Stern School of Business, New York University, 44th West 4th Seet, New York, NY 10012
Email: yamihud@stern.nyu.edu
Telephone: (212) 998-0720
Fax: (212) 995-4220
Homepage: http://www.stern.nyu.edu/~yamihud/

Avi Wohl
Institution: Faculty of Management at Tel Aviv University

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