Terrorism-induced structural shifts in financial risk: airline stocks in the aftermath of the September 11th terror attacks

By Konstantinos Drakos. Transnational Terrorism, 2004

152 citations recorded by the source corpus.

Abstract This paper investigates the effects of terror attacks of September 11 on a set of airline stocks listed at various international stock markets. Utilizing the Market Model as the relevant return generating mechanism, we document a structural break in systematic risk (beta) for airline stocks. Moreover, our empirical evidence shows that, apart from the systematic risk, idiosyncratic risk has also substantially increased. In quantitative terms, conditional systematic risk has on average more than doubled, while the percentage it represents over total risk has shown a considerable increase. These results have implications for portfolio diversification and the cost (and ability) of airlines in raising capital.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/08ed1af757f337b7ab15f88da35475dcf55e836b

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Citations in the corpus

Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach (2017, background): “…news or events (for example, terror attacks) in predicting movements of financial market returns and volatility (see for example, Chen and Siems 2004; Drakos 2004; Eldor and Melnick 2004; Hon, Strauss, and Yong 2004; Johnston and Nedelescu 2006; Abadie and Gardeazabal 2008; Arin, Ciferri, and…”
How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique (2020, background): “Studies on the effects of political stresses, and law and order situation on stock returns (especially of tourism business) are relatively limited (see, for example, Drakos, 2004; Chen, 2011; Zopiatis et al., 2019), which generally blamed terrorism for the poor performance of tourism stocks.”
The impact of terrorism on European tourism (2019, background): “Each industry with a tourism ratio (identified as tourism-related receipts as a percentage of its total turnover) exceeding 15% is regarded as part of the tourism system (Efthymiou and Papatheodorou [2015]). Therefore, commercial aviation and marine cruising, both with a ratio over 90%, are regarded”
Geopolitical risks and stock market dynamics of the BRICS (2018, methodology): “In the process, our paper adds to the related literature of terror attacks on financial markets (Chen and Siems, 2004; Drakos, 2004, 2010; Eldor and Melnick, 2004; Hon et al., 2004; Isreal et al., 2004; Johnston and Nedelescu, 2005; Karolyi and Martell, 2005; Chuliá et al., 2007; Abadie and…”