The impact of terror attacks on global sectoral capital markets: An empirical study

Authors

  • Stelios Markoulis University of Cyprus Cyprus International Institute of Management Frederick University
  • Nikolas Neofytou

DOI:

https://doi.org/10.15355/epsj.14.1.46

Keywords:

Event study method, terror attacks, global equity markets

Abstract

This article examines the effects of fifteen major terror attacks perpetrated in the U.S. and Europe between 2001 and 2017 on a general global stock market index as well as on industry-specific indices, namely (1) airlines, (2) global hotels, restaurants, and leisure (hospitality), and (3) global utilities. Using an event-study method, we show that attacks tend to result in significant negative abnormal returns on the day of attack which, on occasion, persist for a few days. As expected, adverse market effects appear more pronounced, in terms of magnitude and persistence, for the global airline and hospitality industries than for the global utilities industry. Attacks in Europe since 2015 show no adverse global market effects, with two late exceptions (the London Bridge and Barcelona attacks, both in 2017). This might suggest that just when investors and markets seemed to have learned to cope with attacks, these two latter events caused some concern again. Implications of our findings for short- and long-term global investor strategy are discussed.

Author Biography

Stelios Markoulis, University of Cyprus Cyprus International Institute of Management Frederick University

Dr Stelios Markoulis currently teaches in the area of finance at the University of Cyprus, the Open University of Cyprus, the Cyprus International Institute of Management and Frederick University. His research interests are currently in the area of empirical finance and current projects include bank distress and the effects of exogenous shocks, such as terror attacks, on capital markets. Stelios is also an Honorary Visiting Research Fellow at Cass Business School, London.

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Published

2019-03-25

How to Cite

Markoulis, S., & Neofytou, N. (2019). The impact of terror attacks on global sectoral capital markets: An empirical study. The Economics of Peace and Security Journal, 14(1). https://doi.org/10.15355/epsj.14.1.46

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