EconPapers    
Economics at your fingertips  
 

Big Questions, Little Answers: Terrorism Activity, Investor Sentiment and Stock Returns

Konstantinos Drakos ()

No 8, Economics of Security Working Paper Series from DIW Berlin, German Institute for Economic Research

Abstract: Motivated by the investor sentiment literature and assuming that terrorist activity influences investor mood the paper explores whether terrorism exerts a significant negative impact on daily stock market returns for a sample of 22 countries. The employed empirical specifications are based on flexible versions of the World CAPM allowing for autoregressive conditional heteroscedasticity. The results suggest that terrorist activity leads to significantly lower returns on the day of terrorist attack occurrence. In addition, the negative effect of terrorist activity is substantially amplified as the level of psychosocial effects increases. On the one hand this evidence sheds light to the underlying mechanism via which terrorism affects stock markets while on the other hand provides further empirical support for the sentiment effect.

Keywords: Sentiment; Terrorism; Stock Market; Panel; Pooled Panel ARCH (search for similar items in EconPapers)
JEL-codes: C33 E44 G15 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.diw.de/documents/publikationen/73/diw_0 ... /diw_econsec0008.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diweos:diweos8

Access Statistics for this paper

More papers in Economics of Security Working Paper Series from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().

 
Page updated 2018-10-16
Handle: RePEc:diw:diweos:diweos8