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The impact of disasters and terrorism on the stock market

The growing number of negative events worldwide, among them natural disasters, artificial disasters and terrorism, has led the public to focus attention on the impact of such events on the economy and the capital market. This research examines the effects of natural disasters, artificial disasters a...

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Detalles Bibliográficos
Autores principales: Tavor, Tchai, Teitler-Regev, Sharon
Formato: Online Artículo Texto
Lenguaje:English
Publicado: AOSIS 2019
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6407467/
https://www.ncbi.nlm.nih.gov/pubmed/30863506
http://dx.doi.org/10.4102/jamba.v11i1.534
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author Tavor, Tchai
Teitler-Regev, Sharon
author_facet Tavor, Tchai
Teitler-Regev, Sharon
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description The growing number of negative events worldwide, among them natural disasters, artificial disasters and terrorism, has led the public to focus attention on the impact of such events on the economy and the capital market. This research examines the effects of natural disasters, artificial disasters and terrorism on the stock market in order to reveal profit opportunities. In this research, we collected data on 344 significant events that received media attention and examined the differences between the three types of events using the Pessimism Index. Some of the results include the following: (1) natural disasters cause the greatest damage to the economy, whereas terrorism causes the least damage; (2) natural disasters exhibit the highest level of severity, whereas artificial disasters have the lowest severity. The research reveals some opportunities for investors to obtain arbitrage profits. During natural disasters, the stock index decreases on the day of the events and on the two subsequent days. Therefore, investors should short sell the index on the day of the disaster and hold it for 2 days. On the contrary, during artificial disasters or terrorist incidents, the index drops only on the day of the event and the next day, so investors should short sell the index on the day of the disaster and hold it until the end of the first working day following the incident.
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spelling pubmed-64074672019-03-12 The impact of disasters and terrorism on the stock market Tavor, Tchai Teitler-Regev, Sharon Jamba Original Research The growing number of negative events worldwide, among them natural disasters, artificial disasters and terrorism, has led the public to focus attention on the impact of such events on the economy and the capital market. This research examines the effects of natural disasters, artificial disasters and terrorism on the stock market in order to reveal profit opportunities. In this research, we collected data on 344 significant events that received media attention and examined the differences between the three types of events using the Pessimism Index. Some of the results include the following: (1) natural disasters cause the greatest damage to the economy, whereas terrorism causes the least damage; (2) natural disasters exhibit the highest level of severity, whereas artificial disasters have the lowest severity. The research reveals some opportunities for investors to obtain arbitrage profits. During natural disasters, the stock index decreases on the day of the events and on the two subsequent days. Therefore, investors should short sell the index on the day of the disaster and hold it for 2 days. On the contrary, during artificial disasters or terrorist incidents, the index drops only on the day of the event and the next day, so investors should short sell the index on the day of the disaster and hold it until the end of the first working day following the incident. AOSIS 2019-01-21 /pmc/articles/PMC6407467/ /pubmed/30863506 http://dx.doi.org/10.4102/jamba.v11i1.534 Text en © 2019. The Authors https://creativecommons.org/licenses/by/4.0/ Licensee: AOSIS. This work is licensed under the Creative Commons Attribution License.
spellingShingle Original Research
Tavor, Tchai
Teitler-Regev, Sharon
The impact of disasters and terrorism on the stock market
title The impact of disasters and terrorism on the stock market
title_full The impact of disasters and terrorism on the stock market
title_fullStr The impact of disasters and terrorism on the stock market
title_full_unstemmed The impact of disasters and terrorism on the stock market
title_short The impact of disasters and terrorism on the stock market
title_sort impact of disasters and terrorism on the stock market
topic Original Research
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6407467/
https://www.ncbi.nlm.nih.gov/pubmed/30863506
http://dx.doi.org/10.4102/jamba.v11i1.534
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