The inverse of a terror event? Stock market response to pro-active action

Zvika Afik, Yaron Lahav, Lior Mandelzweig

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Purpose – This paper aims to study and document the effect of counter-terrorism on stock returns. The authors select a sample of pro-active defense operations, performed by the Israeli military and government agencies, with significant media coverage, including leading international channels. Design/methodology/approach – The authors use the event study methodology to assess the effect of each operation on the Israeli equity market. The theoretical background of this work is the recent behavioral literature on anomalies in the formation of asset pricing and in investors’ decision-making. Findings – The authors find generally a statistically significant positive equity market reaction, on average, to prominent successful operations. The initial market response is usually negative and then changes according to the type of event, its specific circumstances and expected ramifications. Originality/value – Unlike the vast prior literature on terror effects, the authors believe that this is the first paper to study the market reaction to prominent counter-terrorism operations.

Original languageEnglish
Pages (from-to)91-105
Number of pages15
JournalStudies in Economics and Finance
Issue number1
StatePublished - 7 Mar 2016
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2016, © Emerald Group Publishing Limited.


  • Counter-terrorism
  • Emerging markets
  • Event study
  • G14, G15


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