Long-term stock market volatility and the influence of terrorist attacks in Europe

Shaen Corbet, Constantin Gurdgiev and Andrew Meegan

The Quarterly Review of Economics and Finance, 2018, vol. 68, issue C, 118-131

Abstract: This paper examines the influence of domestic and international terrorist attacks on the volatility of domestic European stock markets. In the past decade, terrorism fears remained relatively subdued as groups such as Euskadi Ta Askatasuna (ETA) and the Irish Republican Army (IRA) relinquished their arms. However, Europe now faces renewed fear and elevated threats in the form of Middle Eastern and religious extremism sourced in the growth of the Islamic State of Iraq and Levant (ISIL), who remain firmly focused on maximising casualty and collateral damage utilising minimal resources. Our results indicate that acts of domestic terrorism significantly increase domestic stock market volatility, however international acts of terrorism within Europe does not present significant stock market volatility in Ireland and Spain. Secondly, bombings and explosions within Europe present evidence of stock market volatility across all exchanges, whereas infrastructure attacks, hijackings and hostage events do not generate widespread volatility effects. Finally, the growth of ISIL-inspired terror since 2011 is found to be directly influencing stock market volatility in France, Germany, Greece, Italy and the UK.

Keywords: Stock market volatility; Europe; Terrorist attacks; Political Uncertainty (search for similar items in EconPapers)
JEL-codes: C58 G12 G14 G15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:68:y:2018:i:c:p:118-131

DOI: 10.1016/j.qref.2017.11.012

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