Assessing the Impact of Terrorist Attacks on Sovereign Risk Perception: Evidence from Turkey's CDS Market
Year: 2024
Type: article
Abstract: This study investigates the impact of terrorism on financial markets, focusing specifically on Turkey's sovereign Credit Default Swap (CDS) premiums from 2011 to 2017 - period characterized by frequent and diverse terrorist activities. Employing an EGARCH model with dummy variables for various terrorist groups, we analyze immediate and short-term market reactions across different event windows. Our findings reveal significant volatility in CDS premiums following terrorist incidents, with market responses varying depending on the terrorist group perpetrating the incident. This study enhances the understanding of capital market reactions on terrorist events through CDS instruments, highlighting their role in assessing sovereign credit and country risk.
Source: Prague Economic Papers
DOI: 10.18267/j.pep.877
Authors: Ecem Demirhan, Ekin Tokat, Hakki Arda Tokat
Institution: TOBB University of Economics and Technology
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4403952286