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Impact of Terrorism on International Stock Markets

Author(s): Sanjay Kumar, Jiangxia Liu

Citation: Sanjay Kumar, Jiangxia Liu, (2013) "Impact of Terrorism on International Stock Markets," Journal of Applied Business and Economics, Vol. 14, Iss. 4, pp. 42-60

Article Type: Research paper

Publisher: North American Business Press


This article investigates the impact of terrorist attacks on global capital markets. We find economic
consequences of terrorist attacks spillover through trading partners. When a bigger economy (measured
by GDP) is targeted, the spillover is specifically prominent for economically smaller trading partners.
Such partners see a -2.5% reduction in national stock indices. Odds for smaller trading partners
experiencing a negative abnormal stock impact are over 5.7 times greater than other countries. An
attacked country’s bigger trading partners do not experience a decline in stock indices. Democratic
countries are more vulnerable while country specific trade characteristics do not contribute to spillover.