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Terror attacks and individual investor behavior: Evidence from the 2015–2017 European terror attacks

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  • Hasso, Tim
  • Pelster, Matthias
  • Breitmayer, Bastian

Abstract

We study how terrorism impacts individual investor behavior. We utilize international brokerage data to study how individual investors react in the immediate aftermath of a terror attack. We focus on seven major terror attacks that occurred during the European terror attacks of 2015–2017. We find that investors lower their trading activity, use less leverage, and engage in less short selling. This effect is observed on a worldwide basis, with the effects being stronger in the country of attack. The changes in investor behavior can be explained by increased risk aversion and personal loss experiences. The decrease in trading activity leads to an increase in investors’ return on investments.

Suggested Citation

  • Hasso, Tim & Pelster, Matthias & Breitmayer, Bastian, 2020. "Terror attacks and individual investor behavior: Evidence from the 2015–2017 European terror attacks," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
  • Handle: RePEc:eee:beexfi:v:28:y:2020:i:c:s2214635020303245
    DOI: 10.1016/j.jbef.2020.100397
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    More about this item

    Keywords

    Terrorism; Investor behavior; Risk aversion;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General

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