IDEAS home Printed from https://ideas.repec.org/a/rej/journl/v22y2019i74p100-113.html
   My bibliography  Save this article

The impact of Terrorist Attacks on the World Economy. Stock Market Case Study

Author

Listed:
  • Oana Mădălina Popescu

Abstract

The present paper aims to study the impact of terrorist attacks on the economy as a whole and on several European stock markets. Thus, the event study methodology used in this paper identifies negative abnormal returns during the day of the terrorist attack, showing that investor sentiment has been properly incorporated into stock market prices. Moreover, due to a highly integrated global financial system and to the contagion effect generated by the rapid dissemination of information around the world, more negative abnormal returns were identified on markets that present the same characteristics as the one directly affected by the terrorist attack.

Suggested Citation

  • Oana Mădălina Popescu, 2019. "The impact of Terrorist Attacks on the World Economy. Stock Market Case Study," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 22(74), pages 100-113, December.
  • Handle: RePEc:rej:journl:v:22:y:2019:i:74:p:100-113
    as

    Download full text from publisher

    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2019-12-17/3586/6popescuoanamadalina.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Drakos, Konstantinos, 2010. "Terrorism activity, investor sentiment, and stock returns," Review of Financial Economics, Elsevier, vol. 19(3), pages 128-135, August.
    2. Klor, Esteban & Berrebi, Claude & Benmelech, Efraim, 2010. "Economic Conditions and the Quality of Suicide Terrorism," CEPR Discussion Papers 7995, C.E.P.R. Discussion Papers.
    3. Tilman Br�ck & Bengt-Arne Wickstr�m, 2004. "The Economic Consequences of Terror: A Brief Survey," HiCN Working Papers 03, Households in Conflict Network.
    4. Yochi Cohen-Charash & Charles A Scherbaum & John D Kammeyer-Mueller & Barry M Staw, 2013. "Mood and the Market: Can Press Reports of Investors' Mood Predict Stock Prices?," PLOS ONE, Public Library of Science, vol. 8(8), pages 1-15, August.
    5. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
    6. Melnick, Rafi & Eldor, Rafi, 2010. "Small investment and large returns: Terrorism, media and the economy," European Economic Review, Elsevier, vol. 54(8), pages 963-973, November.
    7. Chen, Andrew H. & Siems, Thomas F., 2004. "The effects of terrorism on global capital markets," European Journal of Political Economy, Elsevier, vol. 20(2), pages 349-366, June.
    8. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, vol. 52(1), pages 1-27, January.
    9. Blomberg, S. Brock & Hess, Gregory D. & Orphanides, Athanasios, 2004. "The macroeconomic consequences of terrorism," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1007-1032, July.
    10. Chesney, Marc & Reshetar, Ganna & Karaman, Mustafa, 2011. "The impact of terrorism on financial markets: An empirical study," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 253-267, February.
    11. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chaudhry, Naukhaiz & Roubaud, David & Akhter, Waheed & Shahbaz, Muhammad, 2018. "Impact of terrorism on stock markets: Empirical evidence from the SAARC region," Finance Research Letters, Elsevier, vol. 26(C), pages 230-234.
    2. J. W.B. Bos & M. Frömmel & M. Lamers, 2013. "FDI, Terrorism and the Availability Heuristic for U.S. Investors before and after 9/11," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/850, Ghent University, Faculty of Economics and Business Administration.
    3. Gan Jin & Md Rafiul Karim & Günther G. Schulze, 2024. "The Stock Market Effects of Islamist versus Non-Islamist Terror," Discussion Paper Series 45 JEL Classification: D7, Department of International Economic Policy, University of Freiburg, revised Feb 2024.
    4. Goel, Sanjay & Cagle, Seth & Shawky, Hany, 2017. "How vulnerable are international financial markets to terrorism? An empirical study based on terrorist incidents worldwide," Journal of Financial Stability, Elsevier, vol. 33(C), pages 120-132.
    5. Najam, Najam Ul Sabeeh & Mehmood, Arshad Mehmood, 2019. "The economic cost of terrorism and natural disasters: A deeper analysis of the financial market markets of Pakistan," MPRA Paper 92278, University Library of Munich, Germany.
    6. Balcilar, Mehmet & Bonato, Matteo & Demirer, Riza & Gupta, Rangan, 2018. "Geopolitical risks and stock market dynamics of the BRICS," Economic Systems, Elsevier, vol. 42(2), pages 295-306.
    7. Procasky, William J. & Ujah, Nacasius U., 2016. "Terrorism and its impact on the cost of debt," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 253-266.
    8. Kollias, Christos & Kyrtsou, Catherine & Papadamou, Stephanos, 2013. "The effects of terrorism and war on the oil price–stock index relationship," Energy Economics, Elsevier, vol. 40(C), pages 743-752.
    9. Corbet, Shaen & Gurdgiev, Constantin & Meegan, Andrew, 2018. "Long-term stock market volatility and the influence of terrorist attacks in Europe," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 118-131.
    10. Halkos, George & Managi, Shunsuke & Zisiadou, Argyro, 2017. "Analyzing the determinants of terrorist attacks and their market reactions," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 57-73.
    11. Marwa Elnahass & Mohamed Marie & Mohammed Elgammal, 2022. "Terrorist attacks and bank financial stability: evidence from MENA economies," Review of Quantitative Finance and Accounting, Springer, vol. 59(1), pages 383-427, July.
    12. Iatridis, George, 2012. "Terrorist attacks and company financial numbers: Evidence on earnings management and value relevance from Madrid, London and Istanbul," Research in International Business and Finance, Elsevier, vol. 26(2), pages 204-220.
    13. Kollias, Christos & Papadamou, Stephanos & Stagiannis, Apostolos, 2011. "Terrorism and capital markets: The effects of the Madrid and London bomb attacks," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 532-541, October.
    14. Orbaneja, José R. Valdivia & Iyer, Subramanian R. & Simkins, Betty J., 2018. "Terrorism and oil markets: A cross-sectional evaluation," Finance Research Letters, Elsevier, vol. 24(C), pages 42-48.
    15. Hira Irshad & Hasniza Mohd Taib, 2017. "A Comparative Analysis of Effects of Terrorism on World Equity Markets," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 3(6), pages 202-208.
    16. Stelios Markoulis, 2021. "Do Terror Attacks Affect the Euro? Evidence from the 21st Century," JRFM, MDPI, vol. 14(8), pages 1-24, July.
    17. Gok, Ibrahim Yasar & Demirdogen, Yavuz & Topuz, Sefa, 2020. "The impacts of terrorism on Turkish equity market: An investigation using intraday data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    18. Gul, Tayyeba Gul & Hussain, Anwar Hussain & Bangash, Shafiqullah Bangash & Khattak, Sanam Waghma Khattak, 2010. "Impact of Terrorism on Financial Markets of Pakistan (2006-2008)," MPRA Paper 41990, University Library of Munich, Germany.
    19. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2007. "Calculating Tragedy: Assessing The Costs Of Terrorism," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 1-24, February.
    20. Nicholas Apergis & Matteo Bonato & Rangan Gupta & Clement Kyei, 2016. "Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach," Working Papers 201671, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    terrorist attack; stock market prices; event studies;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rej:journl:v:22:y:2019:i:74:p:100-113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Radu Lupu (email available below). General contact details of provider: https://edirc.repec.org/data/frasero.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.