To read this content please select one of the options below:

Global Catastrophe Effects – the Impact of Terrorism

The Responsive Global Organization

ISBN: 978-1-78714-832-1, eISBN: 978-1-78714-831-4

Publication date: 23 August 2017

Abstract

The purpose of this study is to contribute to existing financial literature within a less researched area through a systematic, organized, and holistic approach. This study advances the notion of considering terrorist attacks as a heterogeneous group of events by employing a multidimensional approach. The event study methodology was used to investigate the impact of 46 terrorist attacks occurring on the soil of OECD countries since 1990 on stock markets in US, UK, Spain, and Denmark. Thereby, terrorist attacks are considered as events conveying information to financial markets, which is processed by investors and subsequently reflected in security prices. This chapter is the first contribution within financial literature to distinguish and categorize terrorist attacks through several dimensions and investigate the effect of various characteristics on stock markets. The multidimensional analytical approach consisted of six dimensions, which included an examination of the national stock markets, differences across industries, the underlying threat characteristics, the size of the attack, and the development over time and geospatial aspects. It is concluded that terrorist attacks exhibiting international threat characteristics result in significantly larger and boundary spanning negative abnormal returns, which impact stock markets beyond the country in which the attack occurred. Additionally, the size of the terrorist attack amplifies the negative impact on stock markets. However, while the impact on stock markets was found to be immediate indicating that stock markets are quick and efficient in absorbing new information, the negative impact is likely to evaporate within five trading days.

Keywords

Citation

Lyngsø Jørgensen, J. and Breum Nielsen, C. (2017), "Global Catastrophe Effects – the Impact of Terrorism ", Andersen, T.J. (Ed.) The Responsive Global Organization (Emerald Studies in Global Strategic Responsiveness), Emerald Publishing Limited, Leeds, pp. 205-238. https://doi.org/10.1108/978-1-78714-831-420171008

Publisher

:

Emerald Publishing Limited

Copyright © 2017 Emerald Publishing Limited