The impact of terrorism on global equity market integration
AbstractIn this paper we investigate the short-term contagion and long-term integration effects of terrorist activity on national stock markets. Using the partially integrated model of Bekaert et al. (Bekaert G, Harvey C and Ng A (2005) Market integration and contagion. Journal of Business 78: 39–69), we examine whether changes in cross-border relationships surrounding recent terrorist events are caused by changes in exposure to common risk factors and investigate whether these findings are similar across both developed and emerging market securities. Our research concludes that terrorism induces substantial contagion and market integration effects on national equity markets. Specifically, we provide strong evidence that major terrorist attacks induce substantial contagion consequences, particularly for developed nation equity markets. In terms of longer-term integration effects, a strong increase in cross-market correlation is observed from the pre to post-9/11 period. However, we find little evidence of an increase in the risk exposures of national markets to common risk factors, suggesting that this heightened correlation is driven by an increase in global risk factor uncertainty. This finding is consistent with the argument that an increase in the risk aversion of market participants is associated with terrorist attacks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Australian School of Business in its journal Australian Journal of Management.
Volume (Year): 37 (2012)
Issue (Month): 1 (April)
Contact details of provider:
Web page: http://www.agsm.edu.au
capital market integration; contagion; international equity markets; terrorism;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications).
If references are entirely missing, you can add them using this form.