Stock Market Volatility and Terrorism

New Evidence from the Markov Switching Model

Dados Bibliográficos

ID21644153
AutoresFaheem Aslam (0000-0001-7308-096X, COMSATS University , 45550 , Islamabad , Pakistan, autor correspondente), Hyoung‐Goo Kang (0000-0002-2428-3741, Hanyang University Business School , Seoul , South Korea), Hyoung-Goo Kang (Hanyang University Business School , Seoul , South Korea), Khurrum S Mughal (0000-0003-2824-7489), Tahir M Awan (0000-0002-5283-2277, COMSATS University , 45550 , Islamabad , Pakistan), Yasir Tariq Mohmand (0000-0003-0719-2060, COMSATS University , 45550 , Islamabad , Pakistan)
Ano2021
Volume27
Fascículo2
Páginas263-284
Data de publicação2021-05-10
Peer ReviewedSim
Open AccessNão
TipoARTICLE
PeriódicoPeace Economics Peace Science and Public Policy (JOURNAL)
Identificadores do periódicoISSN: 1079-2457 • E-ISSN: 1554-8597
EditoraWalter de Gruyter GmbH (PUBLISHER • DE)
DOI10.1515/peps-2020-0005
OpenAlexW3116953827
IdiomaEN
Citações recebidas3
Referências citadas60

Terrorism in Pakistan poses a significant risk towards the lives of people by violent destruction and physical damage. In addition to human loss, such catastrophic activities also affect the financial markets. The purpose of this study is to examine the impact of terrorism on the volatility of the Pakistan stock market. The financial impact of 339 terrorist attacks for a period of 18 years (2000–2018) is estimated w.r.t. target type, days of the week, and surprise factor. Three important macroeconomic variables namely exchange rate, gold, and oil were also considered. The findings of the EGARCH (1, 1) model revealed that the terrorist attacks targeting the security forces and commercial facilities significantly increased the stock market volatility. The significant impact of terrorist attacks on Monday, Tuesday, and Thursday confirms the overreaction of investors to terrorist news. Furthermore, the results confirmed the negative linkage between the surprise factor and stock market returns. The findings of this study have significant implications for investors and policymakers

Business · Economics · Financial economics · Geography · Monetary economics · Political science · Stock exchange · Stock market · Surprise · Terrorism · Economic Sanctions and International Relations · Law · Market Dynamics and Volatility · Terrorism, Counterterrorism, and Political Violence · Finance