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J'Accuse! Antisemitism and Financial Markets in the Time of the Dreyfus Affair

Journal: Journal of Financial Economics

Date: 20240401

Author: Do, Quoc-Anh; Galbiati, Roberto; Marx, Benjamin; Ortiz Serrano, Miguel A.

Abstract:
We study the stock market performance of firms with Jewish board members during the "Dreyfus Affair" in 19th century France. In a context of widespread latent antisemitism, initial accusations made against the Jewish officer Alfred Dreyfus led to short-lived abnormal negative returns for Jewish-connected firms. However, investors betting on these firms earned higher returns during the period corresponding to Dreyfus' rehabilitation, starting with the publication of the famous op-ed J'Accuse! in 1898. Our conceptual framework illustrates how diminishing antisemitic biases among investors might plausibly explain these effects. Our paper provides novel insights on how antisemitism can increase and decrease over short periods of time at the highest socio-economic levels in response to certain events, which in turn can affect firm value in financial markets.

Link: Google Scholar

Key Findings

Impact on Jewish-Connected Firms

Firms with Jewish board members experienced negative returns during initial antisemitic events but showed higher returns during Dreyfus' rehabilitation period after J'Accuse! in 1898

Financial Market Response

During the two years following J'Accuse!, investors holding Jewish-connected stocks earned excess returns of 14.1% compared to other stocks

Media Influence

Pro-Dreyfus media coverage positively impacted Jewish-connected firm returns, while anti-Dreyfus coverage had negative effects

Stock Returns Before and After J'Accuse!

  • Jewish-connected firms experienced -0.073% daily returns before J'Accuse!
  • After J'Accuse!, returns increased to +0.158% daily
  • Pattern holds true for both percentage of Jewish board members and Jewish CEO measures

Jewish Board Representation by Sector

  • Gas/Electricity sector had highest Jewish representation at 16.4%
  • Railways/Transport showed 7.1% Jewish board membership
  • Banking/Insurance had lowest representation at 4.6%

Stock Performance Around Key Events

  • Panama revelations caused -3.07% abnormal returns
  • Dreyfus' degradation led to -4.37% returns
  • Waldeck-Rousseau appointment resulted in +11.34% returns

Contribution and Implications

  • First study to quantify how antisemitic sentiment affects financial markets in real-time
  • Demonstrates how social biases can create arbitrage opportunities in financial markets
  • Shows that media coverage can influence the debiasing of discriminatory beliefs

Data Sources

  • Returns chart based on Table 3, showing daily and monthly returns before/after J'Accuse!
  • Sector representation chart based on Table 1 Panel (a), showing Jewish board membership by sector
  • Event performance chart based on Table 2, showing cumulative abnormal returns around key events