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The Impact of Terrorism on the Defence Industry

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  • CLAUDE BERREBI
  • ESTEBAN F. KLOR

Abstract

This paper analyses the impact of terrorism on Israeli companies related to the defence, security or anti‐terrorism industries, relative to its impact on other companies. We 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‐defence‐related companies, it had a significantly positive overall effect of 7% on defence‐related companies.

Suggested Citation

  • Claude Berrebi & Esteban F. Klor, 2010. "The Impact of Terrorism on the Defence Industry," Economica, London School of Economics and Political Science, vol. 77(307), pages 518-543, July.
    • Handle: RePEc:bla:econom:v:77:y:2010:i:307:p:518-543
    DOI: 10.1111/j.1468-0335.2008.00766.x
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    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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