Impact of terrorism on stock market: Evidence from developed and developing markets

Ahmed, Tanveer and Hussain, Shahzad and Akbar, Muhammad and Rehman, Ajid Ur (2022) Impact of terrorism on stock market: Evidence from developed and developing markets. International Journal of Disaster Risk Reduction, 70. p. 102786. ISSN 2212-4209

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Abstract

This study examines the impact of terrorism on stock market returns through an extensive dataset of 23 countries over the period of 2001–2017. Stock market returns are examined in the context of different aspects of terrorist attacks such as number of suicide attack, number of people killed in terrorist attacks, attacks in major and capital city, the distance of terrorist attack from capital city, property damaged due to terrorist attack and nationality of the victims being killed in a terrorist attack. Consistent with previous studies, our regression analysis reveals that assaults in capital city and severity of attacks negatively influence the index returns. Particularly, the results provide some new insights, with respect to terrorist attacks intended for targeting specific locations with strategic advantages, and assaults in close proximity of capital are found to have more pronounced and devastating effect on the stock market returns. Moreover, foreigners are strategically more valuable targets for terrorists in order to disrupt the smooth functioning of capital markets. The analyses of sub samples, reveal that developing economies are more fragile and developed markets are more resilient to terrorism. Our robust analysis through event methodology confirms our main findings and reveal that negative response of stock market to terrorist attacks is more prominent in developing countries and developed capital markets are more resilient to the negative shocks of terrorist attacks.

Item Type: Article
Identification Number: https://doi.org/10.1016/j.ijdrr.2022.102786
Dates:
DateEvent
6 January 2022Accepted
11 January 2022Published Online
Uncontrolled Keywords: Terrorism, Stock market returns, Developed countries, Developing countries
Subjects: CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Centre for Applied Finance and Economics
Faculty of Business, Law and Social Sciences > Birmingham City Business School > Department of Accounting, Finance and Economics
Depositing User: Muhammad Akbar
Date Deposited: 27 Jan 2022 09:40
Last Modified: 27 Jan 2022 09:40
URI: https://www.open-access.bcu.ac.uk/id/eprint/12723

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