The price of terror: The effects of terrorism on stock market returns and volatility
ABSTRACT In this paper we investigate the effects of terrorism on the financial markets. Evidence from six different financial markets shows that terror has a significant impact on both stock markets and the stock market volatility, and the magnitude of these effects are larger in emerging markets.
- SourceAvailable from: Helge Liebert
- Review of Pacific Basin Financial Markets and Policies 12/2012; 15(04):1250020. DOI:10.1142/S0219091512500208
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ABSTRACT: An expanding body of literature has investigated the economic impact of terrorist attacks. A part of this literature has focused on financial markets. We examine three research questions: whether markets' reactions to terrorism have changed through time; whether market size and maturity determine reactions, and whether reactions depends upon either the type of targets or the perpetrators of the attack. To this effect, a large – the London stock exchange – and a small – the Athens stock exchange – capitalization markets are used as the vehicles for the empirical investigation. Results from an event study methodology as well as from conditional volatility models suggest that size and maturity as well as specific attributes of terrorist incidents are possible determinants of markets' reactions.European Journal of Political Economy 12/2011; 27. DOI:10.1016/j.ejpoleco.2011.05.002 · 1.44 Impact Factor