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Terrorism activities influence on financial stock markets: an empirical evidence from United Kingdom, India, France, Pakistan, Spain and America

Author

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  • Omar Masood

    (University of Lahore, Pakistan)

  • Kiran Javaria

    (University of Lahore, Pakistan)

  • Yelena Petrenko

    (Plekhanov Russian University of Economics, Russian Federation)

Abstract

The aim of this study is to investigate the impact of terrorism activities on five developing and developed economies and their financial markets. Five countries selected for analysis include Spain, United Kingdom, India, Pakistan, United States of America and France. The variables under consideration are terrorism activities and market return of the financial stock markets. This study contains time series data collected on daily basis from 1st Jan 2001 to 31st Dec 2018. Study utilized deductive research approach with quantitative data. A linear regression model is used to estimate the effect of terrorist activities on the market return of the financial stock markets of the selected countries. The results of the model suggest that the market return is very much affected by the occurrence of such terror events and the model is overall statistically significant. The results of this study are consistent with the results of Freytag et al. (2009) and Bas et al., (2017) studies which show that there is significant influence of terrorism activities on financial stock market of five selected countries. This study is very significant and essential for investors and analysts as it helps them to understand how terror factors influence stock market and the right time to invest or exit the market. Findings of the study highlight and explain how terrorism activities influence the overall market return.

Suggested Citation

  • Omar Masood & Kiran Javaria & Yelena Petrenko, 2020. "Terrorism activities influence on financial stock markets: an empirical evidence from United Kingdom, India, France, Pakistan, Spain and America," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 2(1), pages 443-455, March.
    • Handle: RePEc:ssi:jouird:v:2:y:2020:i:1:p:443-455
    DOI: 10.9770/IRD.2020.2.1(4)
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    References listed on IDEAS

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    1. Freytag, Andreas & Krüger, Jens J. & Meierrieks, Daniel & Schneider, Friedrich, 2011. "The origins of terrorism: Cross-country estimates of socio-economic determinants of terrorism," European Journal of Political Economy, Elsevier, vol. 27(S1), pages 5-16.
    2. repec:pri:rpdevs:krueger_maleckova_education_poverty_political is not listed on IDEAS
    3. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, vol. 52(1), pages 1-27, January.
    4. Arye Hillman, 2007. "Economic and security consequences of supreme values," Public Choice, Springer, vol. 131(3), pages 259-280, June.
    5. Alan B. Krueger & Jitka Maleckova, 2002. "Education, Poverty, Political Violence and Terrorism: Is There a Causal Connection?," NBER Working Papers 9074, National Bureau of Economic Research, Inc.
    6. Bart Hobijn, 2002. "What will homeland security cost?," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(Nov), pages 21-33.
    7. repec:pri:rpdevs:krueger_maleckova_education_poverty_political.pdf is not listed on IDEAS
    8. Ethan Bueno De Mesquita, 2005. "The Quality of Terror," American Journal of Political Science, John Wiley & Sons, vol. 49(3), pages 515-530, July.
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    Cited by:

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    2. Anatolijs Kriviņš & JÄ nis TeivÄ ns-Treinovskis & Vladas TumalaviÄ ius & Vladas TumalaviÄ ius, 2021. "Issues of state and national security: Religiously inspired terrorism in the Baltic States: internal and external factors," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 3(1), pages 65-79, March.
    3. Kashif Islam & Ahmad Raza Bilal & Syed Anees Haider Zaidi, 2022. "Symmetric and asymmetric nexus between economic freedom and stock market development in Pakistan," Economic Change and Restructuring, Springer, vol. 55(4), pages 2391-2421, November.
    4. Le Dinh Hac & Dinh Tran Ngoc Huy & Nguyen Ngoc Thach & Bui Minh Chuyen & Pham Thi Hong Nhung & Tran Duc Thang & Tran Tuan Anh, 2021. "Enhancing risk management culture for sustainable growth of Asia commercial bank -ACB in Vietnam under mixed effects of macro factors," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 291-307, March.
    5. Anatolii Kulish & Oleksandr Yunin & Olha Us & Iryna Shapovalova & Ivan Yaromii, 2021. "Smuggling as a threat to economic security of the state," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 384-399, March.
    6. Dinh Tran Ngoc Huy & Bui Thi Thu Loan & Pham Tuan Anh, 2020. "Impact of selected factors on stock price: a case study of Vietcombank in Vietnam," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(4), pages 2715-2730, June.

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    More about this item

    Keywords

    terrorism activities; financial stock market; linear regression model; quantitative analysis; deductive approach;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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