Do terrorist attacks harm financial markets? A meta-analysis of event studies and the determinants of adverse impact

Jin Suk Park; Mohammad Khaleq Newaz

doi:10.1016/j.gfj.2018.06.003

Do terrorist attacks harm financial markets? A meta-analysis of event studies and the determinants of adverse impact

Jin Suk Park, Mohammad Khaleq Newaz

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

920 Downloads (Pure)

Abstract

This study reassesses the common belief that terrorist attacks destabilize financial markets, by analyzing event studies covering 10,576 individual attacks and 141,665 nonattack days across 72 stock and foreign exchange markets in 36 countries from 1996 to 2015. The meta-analysis reveals that terrorist attacks have almost no impact on stock markets and only marginal effect on foreign exchange markets, though effects vary with individual attacks and markets. The number of fatalities slightly raises the likelihood of adverse impact, while the number of wounded and the magnitude of recent attacks slightly decrease it. The markets are hit less hard when attack-day returns are positive, but variance is more likely to increase in the short term. Also, the impact of an attack is stronger when the market is performing extremely well or poorly.

Original language	English
Pages (from-to)	227-247
Number of pages	21
Journal	Global Finance Journal
Volume	37
Early online date	21 Jun 2018
DOIs	https://doi.org/10.1016/j.gfj.2018.06.003
Publication status	Published - Aug 2018

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Global Finance Journal. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Global Finance Journal, [[VOL,] [ISS], (2018)] DOI: 10.1016/j.gfj.2018.06.003
© 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Terrorism
Terrorist Attacks
Stock Market
Foreign Exchange Market
Event Studies
Quantile Regression

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.gfj.2018.06.003

Post-PrintAccepted author manuscript, 1.3 MBLicence: CC BY-NC-ND

Jin Suk Park
- Research Centre for Financial & Corporate Integrity - Associate Professor Academic
Person: Teaching and Research

Cite this

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title = "Do terrorist attacks harm financial markets? A meta-analysis of event studies and the determinants of adverse impact",

abstract = "This study reassesses the common belief that terrorist attacks destabilize financial markets, by analyzing event studies covering 10,576 individual attacks and 141,665 nonattack days across 72 stock and foreign exchange markets in 36 countries from 1996 to 2015. The meta-analysis reveals that terrorist attacks have almost no impact on stock markets and only marginal effect on foreign exchange markets, though effects vary with individual attacks and markets. The number of fatalities slightly raises the likelihood of adverse impact, while the number of wounded and the magnitude of recent attacks slightly decrease it. The markets are hit less hard when attack-day returns are positive, but variance is more likely to increase in the short term. Also, the impact of an attack is stronger when the market is performing extremely well or poorly.",

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author = "Park, {Jin Suk} and Newaz, {Mohammad Khaleq}",

note = "NOTICE: this is the author{\textquoteright}s version of a work that was accepted for publication in Global Finance Journal. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Global Finance Journal, [[VOL,] [ISS], (2018)] DOI: 10.1016/j.gfj.2018.06.003 {\textcopyright} 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/",

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AB - This study reassesses the common belief that terrorist attacks destabilize financial markets, by analyzing event studies covering 10,576 individual attacks and 141,665 nonattack days across 72 stock and foreign exchange markets in 36 countries from 1996 to 2015. The meta-analysis reveals that terrorist attacks have almost no impact on stock markets and only marginal effect on foreign exchange markets, though effects vary with individual attacks and markets. The number of fatalities slightly raises the likelihood of adverse impact, while the number of wounded and the magnitude of recent attacks slightly decrease it. The markets are hit less hard when attack-day returns are positive, but variance is more likely to increase in the short term. Also, the impact of an attack is stronger when the market is performing extremely well or poorly.

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KW - Terrorist Attacks

KW - Stock Market

KW - Foreign Exchange Market

KW - Event Studies

KW - Quantile Regression

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JO - Global Finance Journal

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ER -

Do terrorist attacks harm financial markets? A meta-analysis of event studies and the determinants of adverse impact

Abstract

Bibliographical note

Keywords

UN SDGs

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Jin Suk Park

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