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Terror Attacks and Stock-Market Fluctuations: Evidence Based on a Nonparametric Causality-in-Quantiles Test for the G7 Countries

Author

Listed:
  • Mehmet Balcilar

    (Department of Economics, Eastern Mediterranean University, Turkey ; Department of Economics, University of Pretoria, South Africa ; and IPAG Business School, Paris France)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Germany)

  • Mark Wohar

    (Department of Economics, University of Nebraska-Omaha, USA and Loughborough University, UK)

Abstract

We use a novel non-parametric causality-in-quantiles test to study the effects of terror attacks on stock-market returns and volatility in G7 countries. We also use the novel test to study the international repercussions of terror attacks. Test results show that terror attacks often have significant effects on returns, whereas the effect on volatility is significant only in few cases. The effects on returns in many cases become stronger in terms of significance for the upper and lower quantiles of the conditional distribution of stock-market returns. As for international repercussions, we find that terror attacks mainly affect the tails of the conditional distribution of stock-market returns. We find no evidence of a significant cross-border effects of terror attacks on stock-market volatility.

Suggested Citation

  • Mehmet Balcilar & Rangan Gupta & Christian Pierdzioch & Mark Wohar, 2016. "Terror Attacks and Stock-Market Fluctuations: Evidence Based on a Nonparametric Causality-in-Quantiles Test for the G7 Countries," Working Papers 201608, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201608
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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