gender differential paper IJCRB

ijcrb.webs.com
JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
terrorism attacks have an effect on stock markets all over the world. Jackson (2008) found that
the already prevailing instability of U.S economy was escalated after 9/11 attack.
Besides international brunt of terrorism, stock market reflects the changes caused by national
terrorism attacks. When there is a wave of uncertainty, because of terrorism, the traders and
investor hold back or withdraw their investments affecting the stock market negatively. Tribune
Business News (2004) stated that stock market of Spain was affected by a terrorist attack, and
went down by 130 points.
There are three stock exchanges currently operating in Pakistan. Lahore Stock Exchange is the
first automated stock market of Pakistan. It was founded in Oct, 1970 and is considered to be the
second largest stock exchange of Pakistan. It has 519 listed companies, covering 37 sectors.
Pakistani stock markets are very responsive to terrorism activities.
Mahmood/CentralAsiaOnline(2009), Stated that during 2008-2009, political precariousness and
terrorism caused a loss of $19 billion to Pakistani stock market,
National as well as some international terrorism activities specifically suicide attacks, target
killing etc, influence the trading behavior of investors.
This study aims at analyzing the brunt of terrorism activities occurred in last 9 year, on Lahore
Stock Exchange. The main focus of the study is whether terrorism activities negatively affect
the stock market or positively.
Literature Review
Johnston & Nedelescu (2005) analyzed the impact of terrorism on financial markets and found
that liquid, sound and diversified financial markets are competent in absorbing the distress given
by the terrorist attacks and they remain functional.
Liargovas & Repousis (2010) conducted an event study and analyzed the stock of Greek’ banks
to see the impact of terrorism. They considered three major terrorist attacks (attack in New York
2001, Madrid train bombing 2004 and London train bombing 2005). He found that only one of
these attacks affects Greek banks’ stock negatively and consequently bring significant negative
return.
Christofis et al., (2010) analyzed the impact of Istanbul bombing on the Turkish stock markets.
Findings indicated that the terrorist activities cause significant negative returns in the Turkish
stock markets.
Schmeling (2009) found that markets with less reliability and countries where people have
culture of overreaction are more open to sentiments.
Nikkinen & Vahamaa (2010) conducted a research on terrorism and sentiments of investors.
They analyzed the behavior of FTSE 100 index in the wake of terrorist attacks. They found
adverse impact of terrorism on the sentiments of investors. They concluded that terrorist attacks
cause index level to go down and increase stock markets’ uncertainty.
Alexander (2007) said that terrorist attacks complicate business activities, resulting in exit of
many businesses.
Melnick and Eldor(2010) stated that terrorist assaults cause economic damage and this damage
escalates with media coverage.
Baumert (2007) studied the effect of New York attack, Madrid bombing and London bombing
on global stock markets. He found that the reaction of financial markets to these types of
incidents is negative because investors quickly perceive the economic impact of these type of
attacks.
Drakos (2010) found that the day terrorist attack takes place; returns go down on that particular
day.
COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 1427