Roberto Galbiati (Sciences Po)
18 February 2020 @ 12:00 - 13:15
“J’Accuse…! Antisemitism and Financial Markets in 19th Century France”
Abstract: Does discrimination by some agents create rents for other agents? We study this question in the context of the Dreyfus Affair in 19th century France. The Affair sparked a wave of antisemitism after a French army captain of Jewish descent was wrongfully convicted for high treason. We show that stocks of Jewish-owned companies were more volatile and yielded higher returns during the Affair. Firms with Jewish board members experienced abnormally negative returns after the initial degradation of Dreyfus. However, the publication of “J’Accuse”—signaling the beginning of a public campaign to rehabilitate Dreyfus—led these firms to experience greater stock volatility and higher returns for several months. These higher returns do not seem driven by changes in underlying firm fundamentals. We propose two complementary mechanisms to explain these effects. First, the Affair increased the perceived riskiness of stocks associated with these Jewish-owned firm. Second, the campaign to rehabilitate Dreyfus led some investors to reevaluate their expectations of the performance of these firms. Overall, our findings shed new light on the impacts of seemingly irrelevant news events and ethnic prejudice on financial markets.