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

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...

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Bibliographic Details
Published inStudies in business and economics (Romania) Vol. 14; no. 2; pp. 55 - 72
Main Author El, Khoury Rim
Format Journal Article
LanguageEnglish
Published Sciendo 01.08.2019
Subjects
CAC40
Efficient Market Hypothesis
January effect
Mean Market Adjusted
terrorist attack
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Summary: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.
ISSN:2344-5416
2344-5416
DOI:10.2478/sbe-2019-0025