The Impact of Terrorism on Financial Markets: The positive price effects of IS-terrorism on the European (social) Media and Telecom Industry

In this paper we examine the impactto financial markets ofthe IS-related terrorism wave in Europe since 2015 by testing the possible positive price effects on European media firms. We first examine the effects of terrorism andindividual terrorist characteristics on the European stock market. We find negative transitory effects which -in view of the absence of a long-term fundamental impact -correspondstomarket efficiencyasmarketsrecoverinstantaneously from temporary investor shocks. Second, we examine the possible benefits of terrorism on the European (social) Media and Telecom industry. We find positive and permanent stock price effects indicating areversed (lip-stick) effect for (social) media firms in times of increasing terrorist threat. The results may imply that the industry actually benefits from the sensation-seeking public in times of fear and uncertainty caused by terrorism.