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Stock market returns and terrorist violence: evidence from the Basque Country

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  • Carlos Barros
  • Luis Gil-Alana

Abstract

We analyse the extent of the negative effects of violence in the Basque Country on the financial and economic activity of the region. We use daily data of the Basque stock market index and employ long memory regression models, with the Spanish stock market index and an index for violence employed as weakly exogenous regressors. The results show that violence significantly reduces the stock market returns in the area. On the other hand, the volatility processes are positively correlated with violence, though not statistically significant.

Suggested Citation

  • Carlos Barros & Luis Gil-Alana, 2009. "Stock market returns and terrorist violence: evidence from the Basque Country," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1575-1579.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:15:p:1575-1579
    DOI: 10.1080/13504850701578918
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    Cited by:

    1. Apergis, Emmanuel & Apergis, Nicholas, 2016. "The 11/13 Paris terrorist attacks and stock prices: The case of the international defense industry," Finance Research Letters, Elsevier, vol. 17(C), pages 186-192.
    2. Carlos P. Barros & Luis A. Gil-Alana, 2011. "Terrorism: The Case of ETA," Chapters, in: Derek L. Braddon & Keith Hartley (ed.), Handbook on the Economics of Conflict, chapter 16, Edward Elgar Publishing.
    3. Bash, Ahmad & Alsaifi, Khaled, 2019. "Fear from uncertainty: An event study of Khashoggi and stock market returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 54-58.
    4. Firuze Simay SEZGIN & Caner ÖZDURAK, 2023. "Are Crypto Assets Connected to Real World Shocks? The Nexus Between Terrorist Attacks, Bitcoin and NFTs," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 10(1), pages 113-132, January.
    5. Faheem Aslam & Hyoung-Goo Kang, 2015. "How Different Terrorist Attacks Affect Stock Markets," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(6), pages 634-648, December.
    6. Almaqableh, Laith & Reddy, Krishna & Pereira, Vijay & Ramiah, Vikash & Wallace, Damien & Francisco Veron, Jose, 2022. "An investigative study of links between terrorist attacks and cryptocurrency markets," Journal of Business Research, Elsevier, vol. 147(C), pages 177-188.
    7. Kong, Dongmin & Xiong, Mengxu & Xiang, Junyi, 2021. "Terrorist attacks and energy firms' crash risk in stock markets: Evidence from China," Energy Economics, Elsevier, vol. 102(C).
    8. Wisniewski, Tomasz Piotr, 2016. "Is there a link between politics and stock returns? A literature survey," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 15-23.
    9. Emmanuel Apergis & Nicholas Apergis, 2017. "The impact of 11/13 Paris terrorist attacks on stock prices: evidence from the international defence industry," Applied Economics Letters, Taylor & Francis Journals, vol. 24(1), pages 45-48, January.
    10. Ramiah, Vikash & Wallace, Damien & Veron, Jose Francisco & Reddy, Krishna & Elliott, Robert, 2019. "The effects of recent terrorist attacks on risk and return in commodity markets," Energy Economics, Elsevier, vol. 77(C), pages 13-22.
    11. Yaya, OlaOluwa S. & Gil-Alana, Luis A. & Adekoya, Oluwasegun B. & Vo, Xuan Vinh, 2021. "How fearful are commodities and US stocks in response to global fear? Persistence and cointegration analyses," Resources Policy, Elsevier, vol. 74(C).
    12. Alqahtani, Abdullah & Bouri, Elie & Vo, Xuan Vinh, 2020. "Predictability of GCC stock returns: The role of geopolitical risk and crude oil returns," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 239-249.

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