Terrorism and Stock Market Sentiment

13 Pages Posted: 12 Apr 2010

See all articles by Jussi Nikkinen

Jussi Nikkinen

University of Vaasa - Department of Accounting and Finance

Sami Vähämaa

University of Vaasa


This paper examines the effects of terrorism on stock market sentiment by focusing on the behavior of expected probability density functions of the FTSE 100 index around terrorist attacks. We find that terrorism has a strong adverse impact on stock market sentiment. In particular, terrorist attacks are found to cause a pronounced downward shift in the expected value of the FTSE 100 index and a significant increase in stock market uncertainty. Furthermore, our results show that the expected FTSE 100 probability densities became significantly more negatively skewed and fat-tailed in the immediate aftermath of terrorist acts.

Suggested Citation

Nikkinen, Jussi and Vähämaa, Sami, Terrorism and Stock Market Sentiment. Financial Review, Vol. 45, Issue 2, pp. 263-275, May 2010. Available at SSRN: https://ssrn.com/abstract=1587103 or http://dx.doi.org/10.1111/j.1540-6288.2010.00246.x

Jussi Nikkinen (Contact Author)

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
+358 6 3248541 (Phone)

Sami Vähämaa

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
+358 29 449 8455 (Phone)

HOME PAGE: http://www.uva.fi/~sami

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