Abstract/Summary

This paper studies investor sentiment by examining the impact on the British stock market of naval disasters. Since the British Empire was a world power and its navy was held in great regard, Britain was dependent on control of the sea for survival during World War Two and the sinking of capital ships was a huge blow to the fight against the Axis powers. We find that the market was only significantly affected by a handful of naval disasters which have very clear strategic and political importance. The market was generally not affected by other individual disasters or successes, no matter how emotive those disasters were.