Abstract
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 language | English |
|---|---|
| Title of host publication | New Terrorism Issues |
| Publisher | Nova Science Publishers, Inc. |
| Pages | 77-89 |
| Number of pages | 13 |
| ISBN (Electronic) | 9781617285493 |
| ISBN (Print) | 9781604568547 |
| State | Published - 1 Jan 2009 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2009 by Nova Science Publishers, Inc. All rights reserved.
