DP14826 J'Accuse! Antisemitism and Financial Markets in the time of the Dreyfus Affair

Author(s): Quoc-Anh Do, Roberto Galbiati, Benjamin Marx, Miguel Angel Ortiz Serrano
Publication Date: May 2020
Keyword(s): antisemitism, discrimination, financial markets
JEL(s): G14, G41, J15, J71, N23
Programme Areas: Labour Economics, Public Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14826

This paper explores the financial consequences of the "Dreyfus Affair", a major societal crisis that prompted an outburst of antisemitism in 19th century France. We show that the Dreyfus Affair had sizeable effects on the stock returns of firms with Jewish board members. First, these firms experienced abnormal returns in response to major episodes of the Affair---negative returns after the downfall of Dreyfus in 1895, and positive returns around his rehabilitation in 1899. Second, starting in 1898, the same firms experienced higher returns during a media campaign organized to rehabilitate Dreyfus. These higher returns more than compensated investors for the increase in stock volatility observed in the same period. We estimate these results using a difference-in-differences strategy comparing firms with and without Jewish connections before and after "J'Accuse!", a widely publicized pamphlet denouncing the conspiracy against Dreyfus. We do not observe corresponding changes in the underlying profitability of Jewish-connected firms as measured by dividends. Our preferred interpretation is that the Dreyfus rehabilitation campaign changed discriminatory beliefs among investors, allowing those who bet on Jewish-owned firms to capture excess returns. Overall, our findings provide novel evidence on the existence of rents from discrimination and the financial impacts of ethnic prejudice.