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Stock markets and terrorist attacks: Comparative evidence from a large and a small capitalization market

Christos Kollias, Efthalia Manou, Stephanos Papadamou () and Apostolos Stagiannis

European Journal of Political Economy, 2011, vol. 27, issue S1, S64-S77

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.

Keywords: Terrorism; Financial markets; Conditional volatility; Event study (search for similar items in EconPapers)
JEL-codes: C22 G14 G21 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1016/j.ejpoleco.2011.05.002

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European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

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