Insider trading on Ottoman sovereign default: The Ottoman General Debt Bond at European and Istanbul financial markets

Abstract

Using efficient market hypothesis and structural break frameworks, this paper examines insider trading during the Ottoman sovereign default, as historical narratives claim information leakage. If the narratives were true, informed traders would sell the Ottoman government's bonds to avoid excessive losses before the default, creating a negative price shock in case of market inefficiency. This paper employs the Ottoman General Debt Bond prices in Istanbul, London, and Paris compiled from Ottoman and European newspapers. The results do not confirm price shocks just before the sovereign default announcement. Thus, investors seem to have anticipated the default before its official declaration.