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Terrorism and capital markets: The effects of the Madrid and London bomb attacks

Christos Kollias, Stephanos Papadamou () and Apostolos Stagiannis

International Review of Economics & Finance, 2011, vol. 20, issue 4, 532-541

Abstract: Using event study methodology and GARCH family models, the paper investigates the effects of two terrorist incidents - the bomb attacks of 11th March 2004 in Madrid and 7th July 2005 in London - on equity sectors. Significant negative abnormal returns are widespread across the majority of sectors in the Spanish markets but not so in the case of London. Furthermore, the market rebound is much quicker in London compared to the Spanish markets where the attackers were not suicide bombers. Nevertheless, the overall findings point to only a transitory impact on return and volatility that does not last for a long period.

Keywords: Terrorism; Capital; markets; Event; study; Conditional; volatility; GARCH (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:eee:reveco:v:20:y:2011:i:4:p:532-541