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The impact of terrorism on financial markets: an empirical study - Zurich Open Repository and Archive


Chesney, Marc; Reshetar, Ganna; Karaman, Mustafa (2011). The impact of terrorism on financial markets: an empirical study. Journal of Banking and Finance, 35(2):253-267.

Abstract

The main focus of this paper is to previous termstudynext term empirically the previous termimpact of terrorismnext term on the behavior of stock, bond and commodity previous termmarkets.next term We consider terrorist events that took place in 25 countries over an 11-year time period and implement our analysis using different methods: an event-previous termstudynext term approach, a non-parametric methodology, and a filtered GARCH–EVT approach. In addition, we compare the effect of terrorist attacks on previous termfinancial markets with the impactnext term of other extreme events such as previous termfinancialnext term crashes and natural catastrophes. The results of our analysis show that a non-parametric approach is the most appropriate method among the three for analyzing the previous termimpact of terrorism on financial markets.next term We demonstrate the robustness of this method when interest rates, equity previous termmarketnext term integration, spillover and contemporaneous effects are controlled. We show how the results of this approach can be used for investors’ portfolio diversification strategies against previous termterrorismnext term risk.

Abstract

The main focus of this paper is to previous termstudynext term empirically the previous termimpact of terrorismnext term on the behavior of stock, bond and commodity previous termmarkets.next term We consider terrorist events that took place in 25 countries over an 11-year time period and implement our analysis using different methods: an event-previous termstudynext term approach, a non-parametric methodology, and a filtered GARCH–EVT approach. In addition, we compare the effect of terrorist attacks on previous termfinancial markets with the impactnext term of other extreme events such as previous termfinancialnext term crashes and natural catastrophes. The results of our analysis show that a non-parametric approach is the most appropriate method among the three for analyzing the previous termimpact of terrorism on financial markets.next term We demonstrate the robustness of this method when interest rates, equity previous termmarketnext term integration, spillover and contemporaneous effects are controlled. We show how the results of this approach can be used for investors’ portfolio diversification strategies against previous termterrorismnext term risk.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:February 2011
Deposited On:01 Mar 2011 14:05
Last Modified:05 Apr 2016 14:46
Publisher:Elsevier
ISSN:0378-4266
Publisher DOI:https://doi.org/10.1016/j.jbankfin.2010.07.026

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