Abstract
The tragic events of September 11, 2001, exacerbated an already very difficult situation in the U.S. and world stock markets. The shock in the U.S. market driven by the terrorist attacks gave rise to a synchronous downturn for United States and nearly all major emerging markets around the world. Mean returns immediately following the attacks fell by 4.93 percent for the S&P 500 Index, 12.02 percent for the KOSPI of Korea, 6.72 percent for the Thailand SET General Index, 9.18 percent for the BOVESPA of Brazil, 2.71 percent for the Mexico SE IPC, and 2.79 percent for the Prague SE PX Index of the Czech Republic. At the same time, the market volatility rose drastically across the emerging markets. Apparently, increased international financial linkages have played an important role in the synchronicity of global market downturns.
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Notes
K. C. Mun, “Contagion and Impulse Response of International Stock Markets around the 9/11 Terrorist Attacks,” Global Financial Journal 16 (2005): 48–68.
Mervyn A. King, Enrique Sentana, and Sushil Wadhwani, “Volatility and Links between National Stock Markets,” Econometrica 62 (1994): 901–933
François Longin and Bruno Solnik, “Is the Correlation in International Equity Returns Constant: 1960–1990?” Journal of International Money and Finance 14 (1995): 3–26
There is no general consensus as to the definition of contagion. We will explore the Forbes and Rigobon’s definition of contagion in the remainder of this chapter. See Kristin J. Forbes and Roberto Rigobon, “No Contagion, Only Interdependence: Measuring Stock Market Comovements,” Journal of Finance 57 (2002): 2223–2261.
See, for example, Y. Hamao, R. W. Masulis, and V. K. Ng, “Correlation in Price Changes and Volatility across International Stock Markets,” Review of Financial Studies 3 (1990): 281–307
Latha Ramchand and Raul Susmel, “Volatility and Cross Correlation across Major Stock Markets,” Journal of Empirical Finance 5 (1998): 397–416
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© 2009 Matthew J. Morgan
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Mun, KC. (2009). The 9/11 Terrorist Attacks and Emerging Stock Markets. In: Morgan, M.J. (eds) The Impact of 9/11 on Business and Economics. The Day that Changed Everything?. Palgrave Macmillan, New York. https://doi.org/10.1057/9780230100060_15
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DOI: https://doi.org/10.1057/9780230100060_15
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