The Financial Costs of Terror: Evidence from Berlin and Munich Attacks

Jamal Bouoiyour (1) , Refk Selmi (2, 1)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques
2 IRMAPE - Institut de Recherche en Management et Pays Emergents

Although the physical and emotional costs of terrorism are widely known, the financial price of terror attacks is still obscure. This paper seeks to examine the heightened uncertainty surrounding terror attacks across the two Germany's largest and most visited cities (in particular, Berlin and Munich) to shed some light on the reactions of disaggregated German stock market to those unforeseen events. We robustly find that the impact of terrorism varies across sectors. The Berlin attack causes substantial German stock price moves. The airline, hotels, leisure and communication services were harmfully influenced to those events. Nevertheless, the banking and financial services and defense were weakly affected. More importantly, the German stock market has proven a sharp resilience and a prompt and efficient adaptation. The investors' cognizance of the Germany's modern greatly diversified, and highly competitive economy and the higher institutional quality have allowed to appropriately dealing with adverse consequences associated with terrorist attacks.

Mots clés: Terrorism; the German stock market; Sectoral-level analysis

Domaines: Économie et finance quantitative [q-fin]; Economies et finances

Jamal Bouoiyour, Refk Selmi. The Financial Costs of Terror: Evidence from Berlin and Munich Attacks. The European Journal of Comparative Economics, In press. ⟨hal-02108636⟩