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The Oil Shock and U.S. Factors
Jul 1, 1990
We are reporting nothing new when we state that the 1990 Iraqi invasion of Kuwait, with the resulting reduction in oil supplies, increase in oil prices and heightened fear of inflation, has shocked securities markets worldwide. We can say something of interest, however, concerning the returns to the factors in Barra's U.S. E2 Model during the first two weeks of August. This paper talks about our observations of daily factor returns since the August 2 invasion and compares relative industry performance thus far during this crisis to industry performance during the oil shocks of 1973 and 1979.