Impact of terrorism attacks on stock market: A comparative study between Pakistan and Turkey

Based on existing literatures, there are studies that suggest that there is an impact of terrorism on stock markets but there are also some studies that suggest that there is no impact of terrorism on stock exchange. As a result of some specific terrorist events, this study revealed that there is a relationship between terrorism and stock market. The purpose of this study is to evaluate the impact of different terrorist events that took place between 2010-2017 on the stock market of Pakistan, PSX (Pakistan Stock Exchange) and of Turkey, IST (Istanbul Stock Exchange). The study used daily data to analyze how these two stock markets reacted to some specific terrorist events. Event study methodology has been used. The overall results of this study is revealed that the effects of the terrorist events on stock markets in Turkey and Pakistan are different. Pakistan Stock Exchange is sensitive to major terrorist events in the country. Negative abnormal returns were observed on the stock exchange on the day of the event and 3 days thereafter. On the other side, terrorist events are not reason for abnormal returns for Turkey Istanbul Stock Exchange.