The Vulnerability of Tourism Firms’ Stocks to Terrorist Incidents

This thesis aims to examine the effect of terrorist incidents on the performance of tourism, travel, and leisure firms in the world’s leading tourism countries namely China, France, Germany, Spain, Thailand, Turkey, United Kingdom, and the United States. This thesis, specifically, investigates the influences of terrorist incidents on the firm’s stock returns and volatility using event study and Generalized Autoregressive Conditional Heteroscedasticity family models. The novelty of this research is that not only it focuses on the relationship between terrorism and tourism stock performance and volatility but also uses an event study to examine this relationship. The findings of this study reports the significant effects of the terrorist attacks on tourism firms’ performance in France, Spain, Thailand, Turkey, the United Kingdom, and the United States. The significant effects of the terrorist attacks on tourism firms’ stock volatility, however, were only obtained for France, Thailand, and the United States. These effects were particularly long-lasting in Turkey, Germany, Spain, Thailand, the United Kingdom, and the United States. The overall panel event study analysis as well as the event study for individual countries illustrated the considerable adverse effects of terrorist attacks on firms’ performance in tourism, travel, and leisure industries. The findings of this study are consistent with the Efficient Market Hypothesis, while the results are expected to be of high importance for the financial managers, investors, and portfolio managers.