An empirical analysis of terrorism and stock market spillovers: The case of Spain
An empirical analysis of terrorism and stock market spillovers: The case of Spain
This article assesses spillover effects between terrorist activity and Spanish stock market returns for the period 1993-2017 using the recent methodology proposed by Diebold and Yilmaz (2012). We construct a daily Terror index that reflects terrorist activity of different types of perpetrators: domestic terrorism (ETA) and the 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 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 characterized by ETA terrorist attacks to the recent past characterized by Islamic terrorist attacks.
Laborda, Ricardo
2bdeacea-069f-48ee-a898-a3a9ca486142
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Laborda, Ricardo
2bdeacea-069f-48ee-a898-a3a9ca486142
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Laborda, Ricardo and Olmo, Jose
(2019)
An empirical analysis of terrorism and stock market spillovers: The case of Spain.
Defence and Peace Economics.
(doi:10.1080/10242694.2019.1617601).
Abstract
This article assesses spillover effects between terrorist activity and Spanish stock market returns for the period 1993-2017 using the recent methodology proposed by Diebold and Yilmaz (2012). We construct a daily Terror index that reflects terrorist activity of different types of perpetrators: domestic terrorism (ETA) and the 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 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 characterized by ETA terrorist attacks to the recent past characterized by Islamic terrorist attacks.
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GDPE_Laborda_Olmo_final
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Accepted/In Press date: 8 May 2019
e-pub ahead of print date: 15 May 2019
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Local EPrints ID: 431592
URI: http://eprints.soton.ac.uk/id/eprint/431592
PURE UUID: 07dafa7f-ef38-4776-9c3e-38e808621f3d
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Date deposited: 10 Jun 2019 16:30
Last modified: 16 Mar 2024 07:54
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Author:
Ricardo Laborda
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