Analyzing the determinants of terrorist attacks and their market reactions

Abstract

The aim of this paper is to explore the determinants of terrorist unexpected events and if these events can affect economic markets. Based on the existing literature and the methodologies already been used, our purpose is to draw some attention to specific events, which may create losses to investors or even to countries. Specifically, after a thoughtful consideration of the existing studies, we discuss a number of empirical findings concerning the main determinants of terrorism. Based on previous research there is a belief that religions and especially fanatics is a very significant determinant of an attack. We show that the more democratic and developed countries are inclined to decrease the spread on the returns. Relying on these empirical findings, we discuss the implied policy implications and the necessary further research. © 2017 Economic Society of Australia, Queensland