%0 Journal Article
%T European Markets¡¯ Reactions to Exogenous Shocks: A High Frequency Data Analysis of the 2005 London Bombings
%A Christos Kollias
%A Stephanos Papadamou
%A Costas Siriopoulos
%J International Journal of Financial Studies
%D 2013
%I MDPI AG
%R 10.3390/ijfs1040154
%X Terrorist incidents exert a negative, albeit usually short-lived, impact on markets and equity returns. Given the integration of global financial markets, mega-terrorist events also have a high contagion potential with their shock waves being transmitted across countries and markets. This paper investigates the cross-market transmission of the London Stock Exchange¡¯s reaction to the terrorist attacks of 2005. It focuses on how this reaction was transmitted to two other major European stock exchanges: Frankfurt and Paris. To this effect, high frequency intraday data are used and multivariate Genralised Autorgressive Conditional Heteroskedasticity (GARCH) models are employed. This type of data help reveal a more accurate picture of markets¡¯ reaction to exogenous shocks, such as a terrorist attack, and thus allow more reliable inferences. Findings reported herein indicate that the volatility of stock market returns is increased in all cases examined.
%K capital markets
%K contagion
%K terrorism
%K multivariate GARCH
%U http://www.mdpi.com/2227-7072/1/4/154