Measuring and testing the long-term impact of terrorist attacks on the US futures market

Heng-Chih Chou, Rim Zaabar and David Wang

Applied Economics, 2013, vol. 45, issue 2, 225-238

Abstract: This article investigates the long-term impact of the 11 September 2001 terrorist attacks on the maturity, volume and open interest effects for the S&P 500 index futures contracts. Adopting Chou (2005a, b)'s range-based volatility models, this article provides a number of interesting results. For the maturity effect, we find evidence for a very weak presence in the pre 9/11 period and no presence in the post 9/11 period, indicating that the maturity effect vanishes completely following the event of 9/11. Despite a strong presence of the volume effect in both periods, we detect a relative decrease in the presence during the post 9/11 period. The open interest effect shows a very weak presence during the pre 9/11 period and a strong presence during the post 9/11 period, indicating a stronger open interest effect following the event of 9/11. Furthermore, we show that there is a bi-directional causality relationship between futures volatility and trading volume during the pre 9/11 period, and that the causality relationship between the two variables becomes unidirectional during the post 9/11 period.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:45:y:2013:i:2:p:225-238

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DOI: 10.1080/00036846.2011.597728

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