Terrorism and capital markets: The effects of the Madrid and London bomb attacks |
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| Authors: | Christos Kollias Stephanos Papadamou Apostolos Stagiannis |
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| Affiliation: | 1. Social Medicine and Health Policy, Department of Clinical Sciences, Faculty of Medicine, Lund University, Sweden;2. Centre for Economic Demography (CED), P.O. Box 7083, SE-SE-220 07 Lund, Sweden;1. DCU Business School, Dublin City University, Dublin 9, Ireland;2. Centre of Aviation Research, School of Hospitality and Tourism Management, University of Surrey, UK;3. Trinity Business School, Trinity College Dublin, Dublin 2, Ireland;4. University of Sydney Business School, University of Sydney, Sydney, New South Wales, Australia;5. Institute of Business Research, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu, Ward 6, District 3, Ho Chi Minh City, Viet Nam;1. Department of Economics, Eastern Mediterranean University, Famagusta via Mersin 10, Northern Cyprus, Turkey;2. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;3. IPAG Business School, Paris, France;4. Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany;5. College of Business Administration, University of Nebraska at Omaha, 6708 Pine Street, Omaha, NE 68182, USA;6. School of Business and Economics, Loughborough University, Leicestershire LE11 3TU, UK |
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| Abstract: | Using event study methodology and GARCH family models, the paper investigates the effects of two terrorist incidents – the bomb attacks of 11th March 2004 in Madrid and 7th July 2005 in London – on equity sectors. Significant negative abnormal returns are widespread across the majority of sectors in the Spanish markets but not so in the case of London. Furthermore, the market rebound is much quicker in London compared to the Spanish markets where the attackers were not suicide bombers. Nevertheless, the overall findings point to only a transitory impact on return and volatility that does not last for a long period. |
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