How Different Terrorist Attacks Affect Stock Markets

Terrorist attacks adversely affect the Pakistani stock market. However, such effect is short-lived: the market recovers from terrorist shocks in one day. The impact of attack depends on the locations and types of attack. The more severe the attack (i.e. more people killed), the more negative is the KSE-100 index return. Most interestingly, stock market contains information about future attacks. In sum, different tactics of terrorists have varied effects on financial markets, which in turn can predict terrorist attacks.     

The financial performance of aircraft manufacturers during world war II: the vicissitudes of war

Controversy has long surrounded the role and profitability of US defense contractors. From a financial perspective the question becomes whether defense contractors earn greater profits and investor returns than other companies during military conflicts. We explore this question by examining the accounting profitability and investor returns of US aircraft manufacturers before, during, and after World War II and compare them to a sample of non-defense firms. We also examine the reactions of aircraft stock prices to important political and military events of the time. We find that (1) aircraft stocks exhibited positive abnormal returns around events associated with defense buildups and outbreaks of hostile action and negative returns around events signaling an end to hostilities, (2) the company’s accounting returns improved during the war but these higher accounting returns did not translate into higher stock returns for the shareholders, and (3) investors could have earned higher stock returns had they switched out of aircraft stocks after Pearl Harbor and reinvested the proceeds in the overall market.     

Dangerous work: Terrorism against U.S. diplomats

The goal of diplomats is to represent their countries’ interests through diplomacy, not arms. Because they are not military personnel, they may be perceived as at lower risk of being the target of terrorists. However, recent events have called this perception into question. Despite this danger, there has been little research on terrorist attacks against diplomats. Drawing on the terrorism studies literature, this article argues that diplomats are targeted more than non-diplomatic targets in countries where certain U.S. foreign policies are implemented. An empirical analysis of 471 attacks against U.S. diplomats from 1970 to 2011 reveals that while U.S. alliances and foreign aid increase the likelihood of attacks against diplomats, U.S. military intervention and civil war, on the other hand, increase the risk of terrorism against non-diplomatic targets. This finding is relevant because it shows terrorist attacks against diplomats result from certain types of foreign policy.     

Geopolitical Risks and Movements in Islamic Bond and Equity Markets: A Note

This study applies a non-parametric causality-in-quantiles test to examine the causal effect of geopolitical risks on return and volatility dynamics of Islamic equity and bond markets. Geopolitical risks are generally found to impact Islamic equity market volatility measures, rather than returns. However, geopolitical risks tend to predict both returns and volatility measures of Islamic bonds. Interestingly, causality, when it exists for returns and/or volatility of Islamic equities and bonds, is found to hold over entire conditional distributions of returns and volatilities, barring the extreme ends of the same.     

Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach

Abstract

We use the k-th-order nonparametric causality test at monthly frequency over the period of 1985:1 to 2016:06 to analyze whether geopolitical risks can predict movements in stock returns and volatility of 24 global defense firms. The nonparametric approach controls for the existing misspecification of a linear framework of causality, and hence, the mild evidence of causality obtained under the standard Granger tests cannot be relied upon. When we apply the nonparametric test, we find that there is no evidence of predictability of stock returns of these defense companies emanating from the geopolitical risk measure. However, the geopolitical risk index does predict realized volatility in 50% of the companies. Our results indicate that while global geopolitical events over a period of time is less likely to predict returns, such global risks are more inclined in affecting future risk profile of defense firms.     

Market reactions to regulations on minerals from the democratic republic of the Congo

Using an event study approach to analyze stock market data from the United States, I investigate how regulations on conflict minerals sourced in the Democratic Republic of the Congo were perceived by investors. I find that for a subset of mining companies, stock returns were abnormally high when regulations in the US became more likely. I also find that returns were higher for communications equipment manufacturing companies when strong regulations in the DRC were announced. I argue that these responses were due to the competitive environments faced by each of these company types. These findings relate to debates surrounding the effects of the conflict mineral regulations. While some critics argue that reporting requirements were tantamount to a ban on minerals from the DRC, I find that stock returns for a subset of companies were sensitive to legislation in the DRC after legislation became law in the US, suggesting that market participants did not expect a complete trade ban on regulated mining and trading activities.     

Spatial Distribution of Minority Communities and Terrorism: Domestic Concentration versus Transnational Dispersion

Qualitative studies of terrorist movements frequently highlight the importance of diaspora communities as important factors in producing and sustaining terrorist activity in countries. The underlying theoretical argument is that bifurcation of tight-knit minority communities between countries nurtures separatist or irredentist sentiments among affected community members, thus prompting terrorist activity, while minority community members in other countries might mobilize financial and political resources to support terrorist activity among their compatriots. In this study, we empirically test whether transnational dispersion, versus domestic concentration, of minority communities in countries produces higher incidents of terrorism. Conducting a series of negative binomial estimations on a reshaped database of around 170 countries from 1981 to 2006, derived from the Minorities at Risk database and the Global Terrorism Database, we determine that both transnational dispersion of kin minority communities and domestic concentration of minorities within countries increase terrorism and that transnational dispersion is a particularly robust predictor of terrorist attacks.     

Modeling the effects of military tension on foreign trade: Some preliminary empirical findings from the Greek-Turkish rivalry

In this paper we examine the effects of irreversibility on foreign trade in the case where there are two sources of uncertainty. The two sources considered in this paper are uncertainty arising from business risk and uncertainty arising from military tension. The resulting insights are then used to model the import markets of Greece and Turkey. These models are then empirically estimated, in order to ascertain, on the one hand whether there is evidence that irreversibility is indeed a factor on the supply side of these markets, and on the other hand, the direction of the incidence of military tension on foreign trade. An index of military tension is used for the two countries, based on the number of airspace violations by Turkish military aircraft of Greek airspace.     

Defence industries adjusting to change 1

This paper analyses the impact of terrorist activity on international tourist flows. To this end, we have estimated a cross‐sectional gravity equation for tourism from the G‐7 countries to a sample of 134 destinations over the period 2001–2003. Within this framework, we evaluate the deviation from ‘normal’ tourist flows due to terrorist activity, which is considered as negative advertising for the affected country. The analysis suggests that both domestic victims and international attacks are relevant factors when foreign tourists make their choice. This result is robust under alternative specifications. Moreover, the impact of terrorism is more severe in developing countries.     

Offsets as industrial policy: Lessons from aerospace

Since 1975 “offsets” have begun to appear frequently in contracts covering international sales of aircraft and other products incorporating advanced technology. Offsets involve reciprocity beyond that normally found in an exchange of goods for money. They may involve co‐production or co‐design of the principal item to be exchanged, or acceptance by the seller of goods or services unrelated to it as partial payment (indirect offsets or countertrade).

The United States has become the major provider of offsets and anti‐offset sentiment has grown. Economists interpret them as trade diverting. Politicians from regions suffering loss of employment view them as bestowing unfair advantage to foreign competitors.

The authors examine offsets from both theoretical and policy perspectives and conclude that in such noncompetitive markets, second‐best considerations dominate, requiring case‐by‐case evaluation of impacts and rendering across‐the‐board determinations of welfare loss suspect.     

Terror and Internal Migration in Israel

This paper empirically analyses the effect of terror on internal migration between Israeli subdistricts. Using a unique data-set comprising migration flows for the period 1999–2012 and the number of rocket and non-rocket attacks, we test the hypotheses that terror reduces migration into an affected subdistrict and increases migration out of it. According to our results, the effect of terror on migration is asymmetric as we only find evidence for the first hypothesis. This result remains when we use an instrumental variables strategy that corrects for underreporting of the number of rocket attacks. The largest effects of rocket attacks are found for migration into the Southern subdistrict of Ashqelon as well as into other border regions in Northern Israel, while non-rocket attacks also have substantial effects in the more populous centres of Jerusalem and Tel Aviv.     

The ballot or the bomb belt: the roots of female suicide terrorism before and after 9/11

ABSTRACT

In recent years, an upward trend in terrorist attacks has mirrored an increase in suicide attacks. According to our preliminary analysis, the events of September 11^th marked a sea change in the number of terrorist attacks. While a rich literature has evaluated why terrorists participate in suicide attacks, none have considered the uptick in volume after 9/11, and fewer yet have considered how female fighters may be contributing to this. We evaluate how both structural and female-specific factors affect the likelihood of female fighter suicide attacks. Recent literature discovered a trend in terrorist groups using females as suicide bombers due to cultural norms that permit them to get closer to targets. We test our theory using data from the Chicago Project on Security and Threats Suicide Attack Database (CPOST-SAD) and various datasets from the Quality of Government (QOG) compendium for the 1986–2016 time period. We construct a series of models that consider both female-specific and structural factors that could explain variation in the number of female suicide attacks. Our results indicate that our models encompass relatively stable patterns. Female political empowerment, female educational attainment, and female employment rates are significant and positive in our post-9/11 models, indicating that they may increase female suicide attacks. Democracy is a relevant structural factor and generally yields a positive effect on female suicide attacks across both time periods and multiple models. Ethnic fractionalization is significant in both time periods but yields a negative effect before 9/11 and a positive effect in the later period.     

Switching costs,dynamic uncertainty,and buyer–seller relationships

We analyze strategic relationships between buyers and sellers in markets with switching costs and dynamic uncertainty by investigating the scenario wherein a representative buyer trades with two foreign sellers located in the same foreign country. We show that, under exchange rate uncertainty, switching costs may lead to switching equilibria where both sellers co‐exist in the market with the buyer, or no‐switching equilibria where either seller captures the market. The presence of exchange rate uncertainty facilitates competition by allowing the sellers to co‐exist in the market with the buyer. However, if the level of uncertainty is beyond a threshold, the only viable equilibria are those where one of the sellers captures the market. Further, depending on the level of exchange rate uncertainty and the sellers' variable costs, switching costs may either raise or lower the level of prices in long‐term contracts between the buyer and the sellers. © 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007     

State fragility and violent uprisings in Nigeria

Abstract

The emergence of the Islamic sect, Boko Haram, and its transformation into a terrorist organisation has dominated recent discourse in the fields of political science and security studies, both within and without the socio-politico enclave known as Nigeria. Much of the discussion has centred on the extra-judicial execution of its founder, Mohammed Yusuf, which purportedly intensified the radicalisation of the group, and whether or not the sect receives operational and/or financial support from foreign terrorist associations. The interest of others has been to forecast the possibility of the internationalisation of the group's activities. This paper aligns with those whose interest is to identify and proffer ways of resolving factors that predisposed the Nigerian state to the levels of violence perpetrated by Boko Haram, with a view to averting much greater crises in the future. It adopts some historicism in demonstrating that the responsibility for the deepening insecurity in the country resides in the Nigerian state structure, which has often been seen as willing to sacrifice the well-being of the many for the benefit of a few. On the whole, the paper utilises state fragility as the framework of analysis by identifying the incapacity of the state in effective service delivery, which has as a result created a situation of mass unemployment and extreme poverty that has fanned the Boko Haram uprising. It concludes that a sustainable solution to the crisis lies in addressing the root causes of inequality, unemployment and poverty, with which most Nigerians, particularly in the north, subsist.     

Does counterterrorism spending reduce the incidence and lethality of terrorism? A quantitative analysis of 34 countries

Following the 11 September 2001 attacks, the US government increased its counterterrorism (CT) funding and created several Federal Agencies such as the Department of Homeland Security; Transportation Security Administration; and National Counterterrorism Center. Similarly, the 7 July 2005, London bombings also compelled the British government to increase its CT funding. These examples illustrate a phenomenon that when states experience terrorism, they dramatically increase public safety spending in order to reduce or eliminate the incidents of and casualties resulting from acts of terror. Using statistical data collected from 34 countries covering nine years, this article examines recent CT spending increases. Critically, the authors explore whether recent public safety expenditures can measurably reduce the number of domestic and international terrorist attacks. The implications of their findings should be salient for policy-makers’ assessments of their countries’ current CT strategies and policies concerning their respective Intelligence and Security Communities.     

TERRORISM AND TOURISM: THE CASE OF TURKEY

Using a time series method called ‘transfer function’, this paper examines the effect of terrorism on tourism in Turkey. The results indicate that there exists a negative but small impact of terrorism, which is observed within approximately one year. However, terrorist attacks in Turkey have accounted for a reduction of six million foreign tourists over the last nine years. Moreover, the economic cost of terrorism in the tourism industry was more than $700 million in 2006. However, terrorist attacks in continental Europe and America, and an active war involving a neighboring country, had no effects on tourism in Turkey.     

New terrorist threat to India's internal security: the danger from Pakistan's “Karachi Project”

The spectacular commando-style terrorist strike on Mumbai in November 2008 exposed India's lax internal security structure. As nearly all the security apparatus broke down during the long spell of attacks, massive public outrage flared up across the country calling for a firmer government response. Shockingly, India has done little to prevent a recurrence and a new security threat faces the country every single day not merely before but even after the Mumbai attacks. In contrast, Pakistan's Inter Services Intelligence and the Lashkar-e-Taiba have successfully evaded pressures from both India and the international community and continue their terror campaign against India under the “Karachi Project” with the explicit intention to unsettle South Asia. Classified documents indicated that India is at the forefront of a cataclysmic “nuclear terrorism” threat from a “combination of Pakistan-based terrorists and homegrown radicals.” This article analyses the danger posed by the Indo-Pak radical groups targeting India and India's lack of preparedness to the new security threat from the “Karachi Project.”     

The Randomization of Terrorist Attacks

The purpose of this article is to explore the economic theoretical foundations of the idea that rational terrorist organizations deliberately randomize their attacks (by type, timing, location, and targets) to generate uncertainty and intimidation. A choice theoretic framework is applied to the analysis of the terrorist organization's behavior to determine whether welfare (utility) gains from the randomization of terrorist attacks are plausible and feasible. The randomization of attacks can appear to promise higher amounts of political influence for each resource input but it turns out that randomization cannot manufacture a situation where higher amounts of political influence are obtained for each resource input.The results imply that, rather than randomization and instability, the rational terrorist organization is more likely to prefer stability. The findings and implications provide a theoretical explanation for the non-randomness of terrorist attacks.Thismay be one small step towards explaining the patterns – non-randomness – in the time-series of terrorist incidents.     

SUICIDE TERRORISM AND THE BACKLASH EFFECT

This paper presents a game‐theoretic model of suicide terrorism containing three agents: the terrorist leader; a targeted government; and potential terrorist supporters. Supporters join the terrorist group if they gain more from their participation than from their economic opportunities. Preemptive measures by the government can result in a backlash that encourages recruitment through new grievances. Suicide attacks can also lead to recruitment. Increases in preemption costs and/or economic opportunities can reduce the overall level of terrorism, while increasing the proportion of suicide to normal attacks. An increase in the effect of preemption on recruitment, or the propaganda effect of suicide bombings has the opposite effect of increasing normal and suicide attacks, but decreasing the proportion of suicide to normal attacks in the terrorist organization’s strategy profile.     

Terrorism in West Africa: Real,emerging or imagined threats?

This essay locates the West African region in the context of the post-9/11 discourses on terrorism and counter-terrorism, particularly as it relates to the global war on terror. It identifies and analyses the issues and challenges that flow from the integration of West Africa into hegemonic transnational/globalised security arrangements, and the ways in which the emerging state (militaristic) and globalised security framework could reinforce or, paradoxically, undermine regional, intranational human and environmental security in one of Africa's most troubled regions. It critically examines the possibility of a terrorist threat in the region and analyses the global stakes involved in integrating West Africa into the global war on terror. On this basis, it concludes that zero-sum, militarist, globally driven solutions may fail to address the historical, political, and socio-economic roots of a possible terrorist threat in West Africa.