The CAC 40 Index’s Reaction to Terrorist Attacks: The Case of Charlie Hebdo

Abstract

Over the last decades, terrorism has become a global phenomenon to which every society is exposed from time to time. Terrorist attacks can have many economic consequences that may affect a number of sectors, including the capital market. The main goal of this paper is to examine the reaction of the CAC40 index to one terrorist attack, mainly “Charlie Hebdo” using an event study methodology. By calculating the abnormal returns and the cumulative abnormal returns in the event period, the results obtained show no significant abnormal returns on the day of the terrorist attack suggesting that the market had directly absorbed the effect of the attack. Thus, the findings suggest that the French market is semi-strong efficient. Investors can rely neither on past information nor on publicly available information to make abnormal profits.

Does Stock Market React to Terrorist Attack? An Evidence from 9/11 Attack Using Event Study

“…Several recent studies have examined the effect of terrorist attacks on stock returns. (Hobbs, Schaupp and Gingrich, 2016;El, 2019;Wang and Young, 2020). The findings indicate that although the effects of terrorist attacks on stock market returns are multidimensional, these effects are persistently more significant if the event is a large one.…”