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The price of terror: The effects of terrorism on stock market returns and volatility

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  • Arin, K. Peren
  • Ciferri, Davide
  • Spagnolo, Nicola

Abstract

In this paper we investigate the effects of terrorism on the financial markets. Evidence from six different financial markets shows that terror has a significant impact on both stock markets and the stock market volatility, and the magnitude of these effects are larger in emerging markets.

Suggested Citation

  • Arin, K. Peren & Ciferri, Davide & Spagnolo, Nicola, 2008. "The price of terror: The effects of terrorism on stock market returns and volatility," Economics Letters, Elsevier, vol. 101(3), pages 164-167, December.
  • Handle: RePEc:eee:ecolet:v:101:y:2008:i:3:p:164-167
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    References listed on IDEAS

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    1. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic consequences of terror: theory and the case of Israel," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 971-1002, July.
    2. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
    3. Blomberg, S. Brock & Hess, Gregory D. & Orphanides, Athanasios, 2004. "The macroeconomic consequences of terrorism," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1007-1032, July.
    4. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
    5. Oana M Croitoru & R. B. Johnston, 2005. "The Impact of Terrorism on Financial Markets," IMF Working Papers 05/60, International Monetary Fund.
    6. Karolyi, G. Andrew & Martell, Rodolfo, 2005. "Terrorism and the Stock Market," Working Paper Series 2005-19, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    7. 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.
    8. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
    9. Chen, Andrew H. & Siems, Thomas F., 2004. "The effects of terrorism on global capital markets," European Journal of Political Economy, Elsevier, vol. 20(2), pages 349-366, June.
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