The Effect of Terrorism on Stock Markets: Evidence From the 21st Century

Posted: 7 Aug 2018

See all articles by Stelios Markoulis

Stelios Markoulis

University of Cyprus - Department of Public and Business Administration; Frederick University; Cyprus International Institute of Management (CIIM)

Savvas Katsikidis

University of Cyprus

Date Written: March 14, 2018

Abstract

This paper examines the relationship between terrorist attacks and stock market performance, by employing the “event-study” methodology to examine eleven major terrorist attacks that occurred in the 21st century. Results suggest that earlier events appear to result in higher negative abnormal returns when compared to more recent ones. Where evident, these abnormal returns seem to persist beyond the date of the event, but tend to disappear rather quickly. Some events appear to exhibit a “spill-over” effect influencing international stock markets too. Our most important finding is that recent events do not seem to influence local or international markets, thus suggesting that investors have learnt to better assess terror events and react more calmly to them.

Keywords: event-study methodology, market reaction, stock market performance, terrorism

Suggested Citation

Markoulis, Stelios and Katsikidis, Savvas, The Effect of Terrorism on Stock Markets: Evidence From the 21st Century (March 14, 2018). Available at SSRN: https://ssrn.com/abstract=3215296

Stelios Markoulis (Contact Author)

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS

Frederick University ( email )

7, Y. Frederickou Str.
Pallouriotisa
Nicosia, 1036
Cyprus

Cyprus International Institute of Management (CIIM) ( email )

P.O Box 20378
Aglandjia
Nicosia, CY-2151
Cyprus

Savvas Katsikidis

University of Cyprus ( email )

75 Kallipoleos Street
Nicosia CY 1678, Nicosia P.O. Box 2
Cyprus

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