Using Markets to Measure Pre-War Threat Assessments: The Nordic Countries Facing World War II

The conventional Nordic historiography of World War II states that there were few, if any, in the Nordic countries who perceived a significantly increased threat of war between 1938 and early 1940. At the same time, historical methods face problems when it comes to characterizing often unexpressed beliefs of a large number of people living in the past. In this paper, we present an alternative way to estimate these assessments by analyzing sudden changes in sovereign debt yields collected from the Nordic bond markets of this time. Our results suggest that the Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings hence question some – but not all – of the standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacit views and opinions of large groups of people in the past.