Terrorism and capital markets: The effects of the Madrid and London bomb attacks
Using event study methodology and GARCH family models, the paper investigates the effects of two terrorist incidents - the bomb attacks of 11th March 2004 in Madrid and 7th July 2005 in London - on equity sectors. Significant negative abnormal returns are widespread across the majority of sectors in the Spanish markets but not so in the case of London. Furthermore, the market rebound is much quicker in London compared to the Spanish markets where the attackers were not suicide bombers. Nevertheless, the overall findings point to only a transitory impact on return and volatility that does not last for a long period.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kaketsis, Asimakis & Sarantis, Nicholas, 2006. "The effects of monetary policy changes on market interest rates in Greece: An event study approach," International Review of Economics & Finance, Elsevier, vol. 15(4), pages 487-504.
- Nikkinen, Jussi & Omran, Mohammad M. & Sahlstrom, Petri & Aijo, Janne, 2008. "Stock returns and volatility following the September 11 attacks: Evidence from 53 equity markets," International Review of Financial Analysis, Elsevier, vol. 17(1), pages 27-46.
- S. Brock Blomberg & Gregory D. Hess & Athanasios Orphanides, 2004.
"The Macroeconomic Consequences of Terrorism,"
CESifo Working Paper Series
1151, CESifo Group Munich.
- Frey, Bruno S. & Kucher, Marcel, 2000. "World War II as reflected on capital markets," Economics Letters, Elsevier, vol. 69(2), pages 187-191, November.
- Eckstein, Zvi & Tsiddon, Daniel, 2004.
"Macroeconomic Consequences of Terror: Theory and the Case of Israel,"
CEPR Discussion Papers
4427, C.E.P.R. Discussion Papers.
- 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.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Frey, Bruno S & Kucher, Marcel, 2001. "Wars and Markets: How Bond Values Reflect the Second World War," Economica, London School of Economics and Political Science, vol. 68(271), pages 317-333, August.
- 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.
- Serdar Sayan & M. Ayhan Kose, 2004.
"Guest Editors' Introduction,"
Emerging Markets Finance and Trade,
Taylor & Francis Journals, vol. 40(6), pages 3-6, November.
- Konstantinos Drakos, 2009. "Big Questions, Little Answers: Terrorism Activity, Investor Sentiment and Stock Returns," Economics of Security Working Paper Series 8, DIW Berlin, German Institute for Economic Research.
- Amihud, Yakov & Wohl, Avi, 2004. "Political news and stock prices: The case of Saddam Hussein contracts," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 1185-1200, May.
- Bruck, Tilman & Wickstrom, Bengt-Arne, 2004. "The economic consequences of terror: guest editors' introduction," European Journal of Political Economy, Elsevier, vol. 20(2), pages 293-300, June.
- Rafael Llorca-Vivero, 2008. "Terrorism And International Tourism: New Evidence," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(2), pages 169-188.
- Brock Blomberg & Gregory Hess & J. Hunter Jackson, 2009. "Terrorism And The Returns To Oil," Economics and Politics, Wiley Blackwell, vol. 21(3), pages 409-432, November.
- Graham Bird & S. Brock Blomberg & Gregory D. Hess, 2008. "International Terrorism: Causes, Consequences and Cures," The World Economy, Wiley Blackwell, vol. 31(2), pages 255-274, 02.
- Abadie, Alberto & Gardeazabal, Javier, 2008.
"Terrorism and the world economy,"
European Economic Review,
Elsevier, vol. 52(1), pages 1-27, January.
- Tilman Bruck, 2005.
"An Economic Analysis Of Security Policies,"
Defence and Peace Economics,
Taylor & Francis Journals, vol. 16(5), pages 375-389.
- Mark T. Hon & Jack Strauss & Soo-Keong Yong, 2004. "Contagion in financial markets after September 11: myth or reality?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(1), pages 95-114.
- Engle, Robert F & Ng, Victor K, 1993.
" Measuring and Testing the Impact of News on Volatility,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1749-78, December.
- Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
- Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-54.
- Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June.
- Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Drakos, Konstantinos, 2004. "Terrorism-induced structural shifts in financial risk: airline stocks in the aftermath of the September 11th terror attacks," European Journal of Political Economy, Elsevier, vol. 20(2), pages 435-446, June.
- Kryzanowski, Lawrence & Switzer, Lorne & Jiang, Li, 1995. "Stock market crash behavior of screen-sorted portfolios," International Review of Economics & Finance, Elsevier, vol. 4(3), pages 227-244.
- Athanassiou, Emmanuel & Kollias, Christos & Syriopoulos, Theodore, 2006. "Dynamic volatility and external security related shocks: The case of the Athens Stock Exchange," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(5), pages 411-424, December.
- Levy, Ori & Galili, Itai, 2006. "Terror and trade of individual investors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(6), pages 980-991, December.
- Enders, Walter & Sandler, Todd, 1996. "Terrorism and Foreign Direct Investment in Spain and Greece," Kyklos, Wiley Blackwell, vol. 49(3), pages 331-52.
- Todd Sandler, 2003. "Collective Action and Transnational Terrorism," The World Economy, Wiley Blackwell, vol. 26(6), pages 779-802, 06.
- Drakos, Konstantinos & Kutan, Ali M., 2001. "Regional effects of terrorism on tourism: Evidence from three Mediterranean countries," ZEI Working Papers B 26-2001, University of Bonn, ZEI - Center for European Integration Studies.
- Gupta, Sanjeev & Clements, Benedict & Bhattacharya, Rina & Chakravarti, Shamit, 2004. "Fiscal consequences of armed conflict and terrorism in low- and middle-income countries," European Journal of Political Economy, Elsevier, vol. 20(2), pages 403-421, June.
- Gao, Y. & Tse, Y. K., 2004. "Market segmentation and information values of earnings announcements: Some empirical evidence from an event study on the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 13(4), pages 455-474.
When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:20:y:2011:i:4:p:532-541. See general 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: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.