The impact of terrorism on global equity market integration

Chris Bilson, Tim Braislford, Aiden Hallet, Jing Shi

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)


In this paper we investigate the short-term contagion and long-term integration effects of terrorist activity on national stock markets. Using the partially integrated model of Bekaert et al. (Bekaert G, Harvey C and Ng A (2005) Market integration and contagion. Journal of Business 78: 39–69), we examine whether changes in cross-border relationships surrounding recent terrorist events are caused by changes in exposure to common risk factors and investigate whether these findings are similar across both developed and emerging market securities. Our research concludes that terrorism induces substantial contagion and market integration effects on national equity markets. Specifically, we provide strong evidence that major terrorist attacks induce substantial contagion consequences, particularly for developed nation equity markets. In terms of longer-term integration effects, a strong increase in cross-market correlation is observed from the pre to post-9/11 period. However, we find little evidence of an increase in the risk exposures of national markets to common risk factors, suggesting that this heightened correlation is driven by an increase in global risk factor uncertainty. This finding is consistent with the argument that an increase in the risk aversion of market participants is associated with terrorist attacks.
Original languageEnglish
Pages (from-to)47-60
Number of pages14
JournalAustralian Journal of Management
Issue number1
Publication statusPublished - 2012
Externally publishedYes


  • capital market integration
  • contagion
  • international equity markets
  • terrorism


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