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The War on Terror - Terror on the Stock Market?

Erlandsson, Jakob LU and Hedlund, Jesper (2022) NEKN01 20221
Department of Economics
Abstract
This paper aims to investigate the effect of the major events of the U.S. War on Terror on the stock market. This is done by replicating an event study by Hudson and Urquhart (2015), which analyzes the effects of World War II events on the stock market returns. We develop a method to determine which major events that were most important in this war and investigate the relationship between the events and the S&P 500 returns by applying a parametric CAAR test and a nonparametric sign test. A careful categorization of events allows us to study the effects not only of war events in general, but also if events with certain characteristics affect stock market returns. The results indicate that intensifying events had a significant positive... (More)
This paper aims to investigate the effect of the major events of the U.S. War on Terror on the stock market. This is done by replicating an event study by Hudson and Urquhart (2015), which analyzes the effects of World War II events on the stock market returns. We develop a method to determine which major events that were most important in this war and investigate the relationship between the events and the S&P 500 returns by applying a parametric CAAR test and a nonparametric sign test. A careful categorization of events allows us to study the effects not only of war events in general, but also if events with certain characteristics affect stock market returns. The results indicate that intensifying events had a significant positive effect on the S&P 500 returns and thereby confirms previous findings by Schneider and Troeger (2006) that intensifying events has a positive effect on stock returns. (Less)
Please use this url to cite or link to this publication:
author
Erlandsson, Jakob LU and Hedlund, Jesper
supervisor
organization
alternative title
An event study of major events' effect on S&P 500 returns in the U.S. War on Terror
course
NEKN01 20221
year
type
H1 - Master's Degree (One Year)
subject
keywords
Event study, CAAR, sign test, War on Terror, stock market
language
English
id
9096739
date added to LUP
2022-10-10 09:21:47
date last changed
2022-10-10 09:21:47
@misc{9096739,
  abstract     = {{This paper aims to investigate the effect of the major events of the U.S. War on Terror on the stock market. This is done by replicating an event study by Hudson and Urquhart (2015), which analyzes the effects of World War II events on the stock market returns. We develop a method to determine which major events that were most important in this war and investigate the relationship between the events and the S&P 500 returns by applying a parametric CAAR test and a nonparametric sign test. A careful categorization of events allows us to study the effects not only of war events in general, but also if events with certain characteristics affect stock market returns. The results indicate that intensifying events had a significant positive effect on the S&P 500 returns and thereby confirms previous findings by Schneider and Troeger (2006) that intensifying events has a positive effect on stock returns.}},
  author       = {{Erlandsson, Jakob and Hedlund, Jesper}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The War on Terror - Terror on the Stock Market?}},
  year         = {{2022}},
}