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How stock markets become desensitized to terror

Author

Listed:
  • Deniz Ilalan

Abstract

Purpose - A widely accepted belief indicates that terror activities have negative impact on stock markets. Contrary to numerous empirical studies, the purpose of this paper is to consider this issue from another point of view in the sense that markets can become desensitized to terror. Design/methodology/approach - Here, instead of directly analyzing the existing data, the stochastic nature of the events is taken into consideration. Findings - The author compares three countries and found out that the correlation between terror and stock markets is almost nil when terror events become a commonplace. Originality/value - This paper applies mean reverting stochastic processes to terror incidents and brings out interesting results.

Suggested Citation

  • Deniz Ilalan, 2017. "How stock markets become desensitized to terror," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 24(4), pages 704-711, October.
    • Handle: RePEc:eme:jfcpps:jfc-07-2016-0049
    DOI: 10.1108/JFC-07-2016-0049
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    More about this item

    Keywords

    Stock returns; Mean reverting stochastic processes; Terrorist attacks; C02; G10; G14;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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