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The impact of terror attacks on global sectoral capital markets: An empirical study

Author

Listed:
  • Stelios Markoulis

    (Visiting Professor, Cyprus International Institute of Management, Nicosia, Cyprus. Special Teaching Staff, University of Cyprus, Nicosia, Cyprus. Honorary Visiting Research Fellow, Cass Business School, London, U.K.)

  • Nikolas Neofytou

    (Civil Aviation Authority, Cyprus)

Abstract

This article examines the effects of fifteen major terror attacks perpetrated in the U.S. and Europe between 2001 and 2017 on a general global stock market index as well as on industry-specific indices, namely (1) airlines, (2) global hotels, restaurants, and leisure (hospitality), and (3) global utilities. Using an event-study method, we show that attacks tend to result in significant negative abnormal returns on the day of attack which, on occasion, persist for a few days. As expected, adverse market effects appear more pronounced, in terms of magnitude and persistence, for the global airline and hospitality industries than for the global utilities industry. Attacks in Europe since 2015 show no adverse global market effects, with two late exceptions (the London Bridge and Barcelona attacks, both in 2017). This might suggest that just when investors and markets seemed to have learned to cope with attacks, these two latter events caused some concern again. Implications of our findings for short- and long-term global investor strategy are discussed.

Suggested Citation

  • Stelios Markoulis & Nikolas Neofytou, 2019. "The impact of terror attacks on global sectoral capital markets: An empirical study," Economics of Peace and Security Journal, EPS Publishing, vol. 14(1), pages 46-59, April.
    • Handle: RePEc:epc:journl:v:14:y:2019:i:1:p:46-59
    DOI: 10.15355/epsj.14.1.46
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    File URL: http://www.epsjournal.org.uk/index.php/EPSJ/article/view/303
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    Citations

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    Cited by:

    1. Stelios Markoulis, 2021. "Do Terror Attacks Affect the Euro? Evidence from the 21st Century," JRFM, MDPI, vol. 14(8), pages 1-24, July.
    2. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.
    3. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).

    More about this item

    Keywords

    Event-study methodology; terror attacks; stock market reaction;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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