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How big was the Nazi premium?

Every now and then I like to post about history:

Firms connected with the Nazi party outperformed unaffiliated firms massively. Their share prices rose by 7.2% between January and March 1933 (43% annualised), compared to 0.2% (1.2% annualised) for unaffiliated firms. The politically induced change was equivalent to 5.8% of total market capitalisation. This is a high number by international standards. Johnson and Mitton (2003) estimate that revaluation of political connections in Malaysia during the East Asian crisis wiped 5.8% of share values. While comparable in magnitude, it took 12 months for this change to occur.

Here is more, interesting throughout.

Posted by Tyler Cowen on September 21, 2008 at 06:10 AM in History | Permalink

Comments

Is causality well controlled for in this study (didn't read it)? It strikes me that cooperation with the Nazis may have been a signal that firms had a future that they wanted to protect, so it could have just signaled a better future during a trying economic time.

Posted by: liberalarts at Sep 21, 2008 9:12:06 AM

I for one am glad that public companies associated with our high officials do not get any special preference.

Posted by: odograph at Sep 21, 2008 9:56:05 AM

@liberalarts: Not ethat this happened in only two months, and presumably the effects were not that strong in other periods.

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