-  תקציר מפירסומי מרכז מחקר orif לשוק ההון  -

 Financial Markets and Terrorism:Two Sides of the Barricade Perspective

This paper uses a unique data set to examine the effect of terrorism on financial markets of both sides of the barricade in the Israeli-Palestinian conflict. The mainfinding are: (1) Real economy suffered during the intifada period and share prices declined significantly in both markets; (2) There is a bi-directional causality effects of returns in the two markets and both markets are affected by the US market; (3) Share prices declined in both markets following a terror attack. The more fatal the terror attack is, the greater is the negative effect in the two markets. In the more severe terror attack event (i.e. more people were killed and injured or if it was suicide attack), share prices in the Israeli market declined significantly by 0.63% compared to a decline of 0.16% in less severe attacks. The same pattern is revealed on the Palestinian side. In the more severe terror attack, share prices declined significantly by 0.21% compared with 0.07% in less severe attacks.