A Comparative Analysis of Effects of Terrorism on World Equity Markets
Volume 3, Issue 6 HIRA IRSHAD, HASNIZA MOHD TAIB
Published online: 28 December 2017 Article Views: 33
Abstract
The purpose of the current study is to review the key empirical and theoretical papers regarding the impact of terrorism on the equity returns of developed and developing countries. Furthermore, the current study aimed to compare the differences in the effects of terrorism events on developed and developing equity markets and the possible causes of these differences. Regarding the methodology, the current study has reviewed the previous conceptual and empirical studies. The literature review highlights that the impact of terrorism events varies in the developing/emerging markets and developed markets. Furthermore, the possible causes of differential effect are discussed. Also, the relationship between the level of development and the frequency of terrorism events is elaborated. These findings imply that more emphasis has been placed on the effects of terrorism on equity markets rather than the routes by which terrorism enters the equity market. Future research may focus on this issue by examining the linkages between terrorism, poverty, government spending, and budget allocation to health, education, and other necessities that may increase the opportunity cost for individuals to engage with terrorist groups. Likewise, the corporations need to spend more towards society regarding their Corporate Social Responsibility (CSR) and a tool to reduce the frequency of terrorism events as a risk management strategy. Future studies may also study the country-wise CSR spending and the frequency of terrorism events because terrorism requires pre-event risk mitigation strategies. Therefore, the post-event risk evaluation should be given less importance in comparison to pre-event strategies.
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To Cite this article
Irshad, H., & Taib, H. M. (2017). A comparative analysis of effects of terrorism on world equity markets. International Journal of Business and Administrative Studies, 3(6), 202-208.
