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The Impact of Terrorism on the Defense Industry

Claude Berrebi () and Esteban Klor ()

No WR-597, Working Papers from RAND Corporation

Abstract: This paper analyzes the impact of terrorism on Israeli companies related to the defense, security or anti-terrorism industries, relative to its impact on the rest of the companies. The authors match every Israeli company to the American company with the closest expected return among all the companies that belong to the same industry and trade in the same market in order to isolate the effect of terrorism from other common industry shocks. The findings show that whereas terrorism had a significant negative impact of 5% on non defense-related companies, it had a significantly positive overall effect of 7% on defense-related companies.

Keywords: terror; defense sector; financial markets (search for similar items in EconPapers)
JEL-codes: D74 G14 K42 L64 P16 (search for similar items in EconPapers)
Date: 2008-07
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