The impact of terrorism on Stock Markets: The Boston Bombing Experience in Comparison with Previous Terrorist Events

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The present paper studies the impact of the Boston bombings on the main international stock markets, comparing it with that of previous terrorist attacks (9/11, 3/11 and 7/7). In order to properly embed our analysis in the theoretical framework, first we present an overview of earlier studies centred on the repercussion of terrorism on financial markets. The empirical part consists in measuring whether the return of the Dow Jones, the Ibex, the FTSE, the CAC40, the MIB, the DAX and the Nikkei resulting from the attacks differ statistically —that is, can be considered abnormal— regarding the variations of the 30 trading days before the attack. In addition, we also study the intraday data, contrasting the direct impact of news spread through social media —this was the first time that even official institutions such as the Boston Police used Twitter as main instrument of communication— affected the index of the New York stock market. Finally we also take into consideration the repercussion of the fake tweet about an alleged terrorist attack on the White House hurting president Obama and compare its impact with that of the Boston bombing. Our results show that the reaction of all stock markets after the Boston bombings can be considered abnormal inasmuch as they were significantly different from the mean behaviour of the previous month. They also prove that the impact from 9/11 to Boston have continuously diminished over time, and also that the spread between the reactions of the different markets has reduced considerably. All this would appoint towards the fact that stock markets have learned to less overreact and evaluate the real economic consequences of an terrorist attack more objectively and also that the risk of such an attack is being included more systemically in share prices.
El presente documento estudia el impacto de los atentados de Boston sobre los principales mercados financieros internacionales, comparándolo con el de sucesos terroristas anteriores (11-S, 11-M y 7-J). A fin de enmarcar nuestro análisis en un marco teórico adecuado, revisamos, en primer lugar, aquellos otros trabajos que han estudiado la repercusión de los ataques terroristas sobre los mercados de valores. La parte empírica consiste en medir si la variación del Dow Jones, el Ibex, el FTSE, el CAC40, el MIB, el DAX y el Nikkei difiere de forma estadísticamente significativa de la de las treinta sesiones anteriores a los ataques. A su vez, estudiamos los datos intradía, contrastando el impacto directo de las noticias que fueron difundidas por medio de las redes sociales —es la primera ocasión en la que las que las fuerzas del orden, como la Policía de Boston, emplearon Twitter como principal medio de comunicación— sobre la evolución del índice de la bolsa neoyorquina Dow Jones. Por último, también comparamos el impacto del falso tweet anunciando un supuesto atentado contra la Casa Blanca en el que resultó herido el presidente Obama. Nuestros resultados indican que la reacción de todos las bolsas de valores tras los atentados de Boston pueden considerarse anormales, en tanto que difieren de forma estadísticamente significativa de la del mes anterior. Indican también que existe una clara disminución de estos impacto desde el 11-S hasta la actualidad, al igual que ha ocurrido con la dispersión entre la reacción de los diferentes mercados. Todo esto apunta a que los mercados han aprendido a superar las sobre-reacciones, cuantificando cada vez de forma más realista las consecuencias económicas de los atentados mas también que el riesgo de un atentado terrorista puede estar reflejado de forma más sistémica en las cotizaciones de los títulos.
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