Skip to main content

Department ofEconomics


Predicting Winners in Civil Wars

Kris Mitchener, Steve Haber, Kim Oosterlinck, and Marc Weidenmier

Journal of Banking and Finance 60, pp. 310-319, November 2015 and CEPR Discussion Paper 10109

Button to link people to research publications


We develop a method to estimate which side will win a civil war using data from international financial markets. The key insight we deliver is that, for typical sovereign debt contracts, the probability of debt repayment will equal the probability of victory in a civil war. We test our predictor for standard outcomes in civil wars, including when the incumbent government loses (the Chinese Nationalists), when a new government is installed by a foreign power and decides to repudiate debt (the restoration of Ferdinand VII of Spain), and when there is a secession (the U.S. Confederacy). For China, markets were predicting a Communist victory three years before it happened. For the U.S., markets never gave the South much more than a 40 percent chance of maintaining the Confederacy. For Spain, markets considered the restoration of Ferdinand VII as likely (probabilities above 50%) as soon as France declared its intention to send military forces to the area.

LSB Research, ECON, 2015, Kris Mitchener