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http://dx.doi.org/10.13106/jafeb.2020.vol7.no9.031

Stock Market Response to Terrorist Attacks: An Event Study Approach  

TAHIR, Safdar Husain (Lyallpur Business School, Government College University)
TAHIR, Furqan (Lyallpur Business School, Government College University)
SYED, Nausheen (Department Business Administration, Government College Women University)
AHMAD, Gulzar (Department of Psychology, Lahore Garrison University)
ULLAH, Muhammad Rizwan (Lyallpur Business School, Government College University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.9, 2020 , pp. 31-37 More about this Journal
Abstract
The purpose of this research study is to examine the stock market's response to terrorist attacks. The study uses data of terrorist attacks in different parts of the country (Pakistan) from June 1, 2014 to May 31, 2017. The event window procedure applies to a 16-day window in which 5 days before and 10 days after the attack. In addition, several event windows have been built to test the response of the Pakistan Stock Exchange. KSE-100 index is taken as proxy of response. The total terrorist attacks are classified into four categories: attacks on law enforcement agencies, attacks on civilians, attacks on special places and attacks on politicians, government employees and bureaucrats. The standard market model is used to estimate the abnormal return of the Pakistan Stock Exchange, which takes 252 business days each year. Furthermore, BMP test is used to check statistical significance of cumulative abnormal rate of return (CAAR). The results of this study reveal that total number of terrorist attacks and attacks on law enforcement agencies show long-term effects on Pakistan stock exchange. However, attacks on civilians, attacks on special places and attacks on politicians, government employees and bureaucrats have little effect on the Pakistan Stock Exchange.
Keywords
Stock Market; Terrorist Attacks; Event Study; Abnormal Return; BMP Test;
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Times Cited By KSCI : 6  (Citation Analysis)
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