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Long-Term Stock Market Volatility and the Influence of Terrorist Attacks in Europe

42 Pages Posted: 13 Sep 2017  

Shaen Corbet

Dublin City University Business School

Constantin Gurdgiev

Trinity College, Dublin; Middlebury Institute of International Studies at Monterey (MIIS)

Andrew Meegan

Dublin City University Business School

Date Written: August 2017

Abstract

This paper examines the influence of domestic and international terrorist attacks on the volatility of domestic European stock markets. In the past decade, terrorism fears remained relatively subdued as groups such as Euskadi Ta Askatasuna (ETA) and the Irish Republican Army (IRA) relinquished their arms. However, Europe now faces renewed fear and elevated threats in the form of Middle Eastern and religious extremism sourced in the growth of the Islamic State of Iraq and Levant (ISIL), who remain firmly focused on maximising casualty and collateral damage utilising minimal resources. Our results indicate that acts of domestic terrorism significantly increase domestic stock market volatility, however international acts of terrorism within Europe does not present significant stock market volatility in Ireland and Spain. Secondly, bombings and explosions within Europe present evidence of stock market volatility across all exchanges, whereas infrastructure attacks, hijackings and hostage events do not generate widespread volatility effects. Finally, the growth of ISIL-inspired terror since 2011 is found to be directly influencing stock market volatility in France, Germany, Greece, Italy and the UK.

Keywords: Stock market volatility, Europe, Terrorist attacks, Systemic Risk, Contagion, Terrorism risk, Terrorism

JEL Classification: C58, G12, G14, G15

Suggested Citation

Corbet, Shaen and Gurdgiev, Constantin and Meegan, Andrew, Long-Term Stock Market Volatility and the Influence of Terrorist Attacks in Europe (August 2017). Available at SSRN: https://ssrn.com/abstract=3033951

Shaen Corbet (Contact Author)

Dublin City University Business School ( email )

Dublin 9
Ireland

Constantin Gurdgiev

Trinity College, Dublin ( email )

Trinity College
Dublin 2

Middlebury Institute of International Studies at Monterey (MIIS) ( email )

460 Pierce St
Monterey, CA 93940
United States

Andrew Meegan

Dublin City University Business School

Dublin 9
Ireland

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