Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach

Abstract

We use the k-th-order nonparametric causality test at monthly frequency over the period of 1985:1 to 2016:06 to analyze whether geopolitical risks can predict movements in stock returns and volatility of 24 global defense firms. The nonparametric approach controls for the existing misspecification of a linear framework of causality, and hence, the mild evidence of causality obtained under the standard Granger tests cannot be relied upon. When we apply the nonparametric test, we find that there is no evidence of predictability of stock returns of these defense companies emanating from the geopolitical risk measure. However, the geopolitical risk index does predict realized volatility in 50% of the companies. Our results indicate that while global geopolitical events over a period of time is less likely to predict returns, such global risks are more inclined in affecting future risk profile of defense firms.     

A predisposition to brutality? German practices against civilians and francs-tireurs during the Franco-Prussian war 1870–1871 and their relevance for the German ‘military Sonderweg’ debate

ABSTRACT

The German Sonderweg thesis has been discarded in most research fields. Yet in regards to the military, things differ: all conflicts before the Second World War are interpreted as prelude to the war of extermination between 1939–1945. This article specifically looks at the Franco-Prussian War 1870–71 and German behaviour vis-à-vis regular combatants, civilians and irregular guerrilla fighters, the so-called francs-tireurs. The author argues that the counter-measures were not exceptional for nineteenth century warfare and also shows how selective reading of the existing secondary literature has distorted our view on the war.