Influence of News about Hostilities on Performance of Defense Industry Companies' Stocks

Defense industry – controversial from ethical point of view, but still profitable - is an integral part of modern economy. According to researchers’ findings, this industry could provide one with reliable returns at times when the rest of market is falling. Some investors do not invest in this industry from ethical reasons, but such an approach just results in underpricing and therefore higher returns on defense industry’ stocks. This paper is dedicated to investigation of reaction of defense industry’ stocks on positive and negative news from battleground. Sample of research consists of nine large defense contractors from US and Europe. Period of the research includes three major conflicts (Iraqi war, Libyan war, Syrian war) which took place during 2000-2018. From the one hand, positive and negative news could be considered as an evidence of good and bad quality of company’s production correspondingly. On another hand, positive news imply that end of war is near, which is a bad sign for defense companies that create value from defense supply. For the purposes of this research, we expect that positive news would result in positive reaction and negative news would result in negative reaction.