The impact of terrorism and anti-terrorism on capital markets

Rafi Eldor, Shmuel Hauser, Rafi Melnick, Abrahm Levi

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review


This paper investigates the effect of continuous terror attacks and anti-terrorism policy on stock and bond markets and on the risk premium required by investors. The empirical findings are based on a unique sample of 280 terror events experienced in Israel and 58 targeted killings carried out as anti-terrorism policy during the Intifada years, 2000-2003. Based on daily and intra-daily data of share prices and an index of terror intensity, our main findings are: i) share prices declined by about 0.48% on average following each terror attack but the decline in share prices was due to continued deterioration in expected future cash flows and not due to increased risk premium;; ii) anti-terrorism policy had an insignificant effect on share prices; iii) short-term government bonds substituted for investment in stocks in response to terror attacks.

Original languageEnglish
Title of host publicationNew Terrorism Issues
PublisherNova Science Publishers, Inc.
Number of pages13
ISBN (Electronic)9781617285493
ISBN (Print)9781604568547
StatePublished - 1 Jan 2009

ASJC Scopus subject areas

  • General Social Sciences


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