Short- and long-term effects of the 9/11 event: The international evidence

Vincent Richman, Michael R. Santos, John T. Barkoulas

Research output: Contribution to journalSystematic reviewpeer-review

21 Scopus citations

Abstract

This paper analyzes the short- and long-term effects of the September 11, 2001 terrorist attacks on a comprehensive sample of stock market indices from 33 industrial and emerging economies. From a finance-theoretic point of view, we employ the international capital asset pricing model (ICAPM) to analyze the incidence of the 9/11 event. Consistent with expectations, we document statistically negative short-term stock market reactions to the 9/11 event for 28 countries. More importantly, we find increases in the level of systematic risk for 10 stock markets which attest to the presence of negative permanent effects emanating for the 9/11 event. However, a great many capital markets (including the US, Canada, Japan, China, Russia, and the largest European economies) did not experience statistically significant increases in systematic risk in the post-9/11 period. The decisiveness of the evidence clearly points in the direction of resilience and flexibility of the world capital markets.

Original languageEnglish
Pages (from-to)947-958
Number of pages12
JournalInternational Journal of Theoretical and Applied Finance
Volume8
Issue number7
DOIs
StatePublished - Nov 2005

Scopus Subject Areas

  • Finance
  • General Economics, Econometrics and Finance

Keywords

  • International capital asset pricing model (ICAPM)
  • Systematic risk
  • Terrorism
  • World index

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