The Impact of Terrorism on Liquidity and Information Asymmetry: Evidence from Non-U.S. Stocks Listed on the NYSE

Teressa Elliott, Darius Fatemi, Jang-Chul Kim and Qing Su

Defence and Peace Economics, 2025, vol. 36, issue 3, 307-323

Abstract: In this paper, we examine the impact of a country’s terrorism activity on the liquidity and information asymmetry of non-U.S. stocks listed on the New York Stock Exchange (NYSE) between 2011 and 2019. Our study shows that non-U.S. stocks from countries with higher terrorism index scores demonstrate wider spreads and lower market quality. Furthermore, these stocks display more pronounced price impacts resulting from trades and a higher probability of information-based trading. Additionally, we investigate the impact of major terrorism incidents in Europe on non-U.S. stocks and find that liquidity deteriorates for stocks from countries in the aftermath of terrorist activity, and that the effect from these individual incidents are contained to the first day. These findings imply that a country’s level of terrorism activity significantly influences the market quality of non-U.S. stocks.

Date: 2025
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DOI: 10.1080/10242694.2024.2332168

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