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FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11

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Listed:
  • Bos, J.W.B.

    (Finance)

  • Frömmel, M.
  • Lamers, M.

    (ICIS)

Abstract

We record the existence of an availability heuristic that is reflected in disaster myopia of U.S. investors and exists prior to the attacks of 9/11. We argue that this is fueled by an aggregate experience hypothesis effect, resulting in a pronounced increase in the sensitivity of U.S. stock prices to terrorist attacks on foreign soil. After 9/11, stock prices react proportionally to the size of an attack and the share of FDI stock held in the region by the sector in which firms operate. This effect, non-existent prior to 2002, has become increasingly strong in recent years.

Suggested Citation

  • Bos, J.W.B. & Frömmel, M. & Lamers, M., 2013. "FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11," Research Memorandum 047, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2013047
    DOI: 10.26481/umagsb.2013047
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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