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Small investment and large returns: Terrorism, media and the economy

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  • Melnick, Rafi
  • Eldor, Rafi
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    Abstract

    The study investigates the role of the media in the impact of terrorism on the economy. A unique data set of the newspaper articles that reported terrorist attacks during 2002 is used to evaluate their impact on the Tel Aviv Stock Exchange. An econometric analysis is performed in order to understand how a newspaper decides to cover a terrorist attack, i.e. the number of articles, positioning of articles, whether to include photos and the size of headlines. It was found that media coverage is an important channel through which terrorism produces economic damage. The findings also showed that the economic damage caused by terrorist attacks increases monotonically with the amount of media coverage. It was also found that the economic impact of the media coverage diminishes over time.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Economic Review.

    Volume (Year): 54 (2010)
    Issue (Month): 8 (November)
    Pages: 963-973

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    Handle: RePEc:eee:eecrev:v:54:y:2010:i:8:p:963-973

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    Web page: http://www.elsevier.com/locate/eer

    Related research

    Keywords: Terror Terrorism Media Stock markets September 11;

    References

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    1. Bruno S. Frey & Simon Luechinger & Alois Stutzer, . "Calculating Tragedy: Assessing the Costs of Terrorism," IEW - Working Papers 205, Institute for Empirical Research in Economics - University of Zurich.
    2. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic Consequences of Terror: Theory and the Case of Israel," CEPR Discussion Papers 4427, C.E.P.R. Discussion Papers.
    3. Claude Berrebi & Esteban F. Klor, 2008. "Are Voters Sensitive to Terrorism?: Direct Evidence from the Israeli Electorate," Working Papers 477-1, RAND Corporation Publications Department.
    4. David A. Jaeger & M. Daniele Paserman, 2005. "Israel, the Palestinian Factions, and the Cycle of Violence," Working Papers 23, Department of Economics, College of William and Mary.
    5. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
    6. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, vol. 52(1), pages 1-27, January.
    7. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U.S. Disaster Relief," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 693-728, 05.
    8. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    9. Asaf Zussman & Noam Zussman & Morten Orregaard Nielsen, 2008. "Asset Market Perspectives on the Israeli-Palestinian Conflict," Economica, London School of Economics and Political Science, vol. 75(297), pages 84-115, 02.
    10. Asaf Zussman & Noam Zussman, 2006. "Assassinations: Evaluating the Effectiveness of an Israeli Counterterrorism Policy Using Stock Market Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 193-206, Spring.
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    Cited by:
    1. Bos J.W.B. & Frömmel M. & Lamers M.A.J., 2013. "FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11," Research Memorandum 047, Maastricht University, Graduate School of Business and Economics (GSBE).

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