The impact of terrorist attacks on the financial markets: An application on the stock exchange Istanbul 100 index

Based on the view that investors act rationally on financial markets, and according to Efficient Firms Hypothesis by put forward Eugene Fama, all information is instantly reflected in prices. Immediate reflection of information on prices removes the possibility of investors getting return more than expected from these markets. Therefore, it can be claimed that it is not possible to predict prices by technical and fundamental analysis. However, Investors have always shown that they are not acting rationally and that they sometimes give similar responses to similar situations. In Behavioral Finance, investors tend to be influenced by many sociological, psychological and environmental influences. Especially in recent years, the existence of terrorist attacks, which started to damage the sociological, psychological and administrative structures of societies and start to harm economically, constitute which is the main starting point of our work. The existence and effects of terrorist attacks, that also bring with it important problems in terms of our country, have been discussed for many years. In this perspective, themail purpose of this research is to figure otu the potencial effects of 94 terrorist attacks that occured in Turkey between the dates 20.09.2011-17.02.2017, on Borsa İstanbul 100 Index. To reveal the impact of terrorist attacks, the Event Study methodology is applied and it is examined in two subcategories to get in detain on the effects of the terrorist attacks take place on holidays or weekday days so as to observe more clearly the response given by the market. As a result of the analysis, it is not possible to advocate the existence of a negative or positive trend in the market clearly in the context of the data set and method used. Nevertheless, statistically significant results obtained in the analysis demonstrates that the BIS 100 Index is not efficient in a semi-strong form within the scope of the research. Key Words: Terrorist Attacks, BİST 100 Index, Efficient Market Hypothesis, Behavioral Finance, Event Study.