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Testing equity market efficiency around terrorist attacks

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This article uses the nine major bombings since 1998 that have been attributed to Al Qaida to examine market efficiency, including a test of rumours that investors traded with advance knowledge of attacks. Analysis of these related, but individually unexpected, events confirms markets are semi-strong efficient: it now takes well under a trading day to fully price in a completely unexpected attack. On balance, markets also proved strongly efficient with no conclusive evidence of insider trading.

Keywords: 9-11; G14; G15; event studies; forensic finance; insider trading; terrorist attacks

Document Type: Research Article


Affiliations: Finance Department,University of Melbourne, ParkvilleVictoria 3010, Australia

Publication date: 2012-11-01

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