An Empirical Analysis of Terrorism and Stock Market Spillovers: The Case of Spain

This article assesses the spillover effects between terrorist activity and Spanish stock market returns for the period 1993–2017. We construct a daily terror index that reflects the terrorist activity of different types of perpetrators: domestic terrorism (ETA) and international terrorism linked to...

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Detalles Bibliográficos
Autores: Laborda, R., Olmo, J.
Tipo de recurso: artículo
Estado:Versión aceptada para publicación
Fecha de publicación:2021
País:España
Institución:Universidad de Zaragoza
Repositorio:Zaguán. Repositorio Digital de la Universidad de Zaragoza
OAI Identifier:oai:zaguan.unizar.es:150951
Acceso en línea:http://zaguan.unizar.es/record/150951
Access Level:acceso abierto
Descripción
Sumario:This article assesses the spillover effects between terrorist activity and Spanish stock market returns for the period 1993–2017. We construct a daily terror index that reflects the terrorist activity of different types of perpetrators: domestic terrorism (ETA) and international terrorism linked to Islamic extremism. Our static analysis shows that connectedness is important, as it explains about half of the forecast error variance; most of it is attributed to shocks from terrorist events on stock market return forecasts. Our dynamic analysis also uncovers an increase in spillover effects between the early period characterised by ETA terrorist attacks and the recent past characterised by Islamic terrorist attacks.

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