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The Impact of Terrorist Attacks in G7 Countries on International Stock Markets

By experts Panayiotis Papakyriakou, University of Southampton - Department of Banking and Finance; Athanasios Sakkas, University of Southampton; Zenon Taoushianis, University of Cyprus.


We consider terrorism acts in G7 countries over the period 1998-2017 and examine their impact on a sample of stock market indices from 66 countries. Using an event-study methodology we find that stock markets decline significantly on the event day and on the following trading day. We further consider the investor sentiment following the attacks, based on the content of country-level news stories and social media sources, and find that indices in countries associated with higher declines in the post-event sentiment, exhibit significantly higher economic losses. Our data and results are robust to several settings; these include using samples of events from different studies, excluding the 9/11 terrorist attack from the sample of events, excluding stock market indices of G7 countries from the sample of equity data and utilizing more sophisticated event-study methodologies.

Keywords: terrorism, stock markets, investor sentiment, surprise

JEL Classification: G12, G14, G15

Suggested Citation:

Papakyriakou, Panayiotis and Sakkas, Athanasios and Taoushianis, Zenon, The Impact of Terrorist Attacks in G7 Countries on International Stock Markets and the Role of Investor Sentiment (January 2019). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN:


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