Next Article in Journal
Systematic Positive Expected Returns in the UK Fixed Odds Betting Market: An Analysis of the Fink Tank Predictions
Previous Article in Journal
Bank Regulation in Dollarized Economies: The Case of Turkey
Article Menu

Export Article

Open AccessArticle
Int. J. Financial Stud. 2013, 1(4), 154-167; https://doi.org/10.3390/ijfs1040154

European Markets’ Reactions to Exogenous Shocks: A High Frequency Data Analysis of the 2005 London Bombings

1
Department of Economics, University of Thessaly, Korai 43, Volos 38333, Greece
2
Department of Business Administration, University of Patras, Rio, Patras 26504, Greece
*
Author to whom correspondence should be addressed.
Received: 29 September 2013 / Revised: 7 November 2013 / Accepted: 11 November 2013 / Published: 18 November 2013
View Full-Text   |   Download PDF [337 KB, uploaded 18 November 2013]   |  

Abstract

Terrorist incidents exert a negative, albeit usually short-lived, impact on markets and equity returns. Given the integration of global financial markets, mega-terrorist events also have a high contagion potential with their shock waves being transmitted across countries and markets. This paper investigates the cross-market transmission of the London Stock Exchange’s reaction to the terrorist attacks of 2005. It focuses on how this reaction was transmitted to two other major European stock exchanges: Frankfurt and Paris. To this effect, high frequency intraday data are used and multivariate Genralised Autorgressive Conditional Heteroskedasticity (GARCH) models are employed. This type of data help reveal a more accurate picture of markets’ reaction to exogenous shocks, such as a terrorist attack, and thus allow more reliable inferences. Findings reported herein indicate that the volatility of stock market returns is increased in all cases examined. View Full-Text
Keywords: capital markets; contagion; terrorism; multivariate GARCH capital markets; contagion; terrorism; multivariate GARCH
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

Share & Cite This Article

MDPI and ACS Style

Kollias, C.; Papadamou, S.; Siriopoulos, C. European Markets’ Reactions to Exogenous Shocks: A High Frequency Data Analysis of the 2005 London Bombings. Int. J. Financial Stud. 2013, 1, 154-167.

Show more citation formats Show less citations formats

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Int. J. Financial Stud. EISSN 2227-7072 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top