Terrorism and international stock returns

Paresh Kumar Narayan, Seema Narayan () and Dinh Phan ()

Journal of International Financial Markets, Institutions and Money, 2022, vol. 76, issue C

Abstract: We develop a terrorism risk factor and show its statistical and economic relevance to stock returns. Using time-series data from 40 stock markets around the world, we show that our terrorism factor has a statistically strong contemporaneous effect on countries’ stock returns and is able to predict returns for approximately 53% of the countries in our sample. Our findings suggest that the source of this predictability is via both the discount rate and cash flow channels. Our results survive a battery of robustness tests, including tests based on multiple proxies for the terrorism factor.

Keywords: Terrorism; Stock returns; Predictability; Time-series; Robustness test (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:76:y:2022:i:c:s1042443121001736

DOI: 10.1016/j.intfin.2021.101467

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