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The stock market effects of Islamist versus non-Islamist terror

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  • Jin, Gan
  • Karim, Md Rafiul
  • Schulze, Günther G.

Abstract

We are the first to analyze the effect of terror on stock markets by terror ideology. Surprisingly, we find that Islamist terror attacks created significant negative abnormal returns in American and European markets, but the stock market effects of other terror attacks were almost nil. For our sample of all 124 terrorist attacks in the US and Europe in the period 1994 to 2018 that caused at least five fatalities or ten injured people, we show that Islamist terror attacks are given significantly more air time (also after controlling for attack characteristics and the media pressure of competing news stories). This, however, explains only part of the differential effect of Islamist attacks on the stock markets.

Suggested Citation

  • Jin, Gan & Karim, Md Rafiul & Schulze, Günther G., 2026. "The stock market effects of Islamist versus non-Islamist terror," European Journal of Political Economy, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:poleco:v:93:y:2026:i:c:s0176268026000443
    DOI: 10.1016/j.ejpoleco.2026.102849
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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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