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

Khoury Rim El 1
  • 1 Notre Dame University Louaize, , Lebanon


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.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Agarwalla, S., & Pandey, A. (2010, March 16). Price impact of block trades and price behavior surrounding block trades in Indian Capital Market. Available at SSRN:

  • Alzahrani, A., Gregoriou, A., & Hudson, R. (2012). Price impact of block trades in the Saudi Stock Market. Journal of International Financial Markets, Institutions & Money, 23, 322-341.

  • Archana, S., Safeer, M., & Kevin, S. (2014). A study on market anomalies in Indian stock market. International Journal of Business and Administration Research and Review, 1(3), 128-137.

  • Armitage, S. (1995). Event study methods and evidence on their performance. Journal of Economic Surveys, 9(1), 25-52.

  • Bachelier, L. (1900). Théorie de la spéculation. Annales Scientifiques de l’École Normale Supérieure, 3 (17), 21–86.

  • Garcia De Andoain, C, & Bacon, F. (2009). The impact of stock spit announcements on stock price: A test of market efficiency. Proceedings of American Society of Business and Behavioral Sciences (ASBBS), 16 (1), 1-14.

  • Ball, R., & Brown, P. (1968). A retrospective. American Accounting Association, 89(1), 1-44.

  • Barnato, K. (2015). Europe, Canada face rising terror threat. CNBC. Retrieved from

  • Barros, C., & Gil-Alana, L. (2008). Stock market returns and terrorist violence: evidence from the Basque Country. Applied Economics Letters, 16 (15), 1575-1579.

  • Bauman, W. (1964). Investment experience with less popular common stocks. Financial Analysts Journal, 20(2), 79-88.

  • Benos, A., & Rockinger, M. (2000). Market response to earnings announcements and interim reports: an analysis of SBF120 companies. Annales D’économie et de statistique, 60, 151-175.

  • Binder, J. (1998). The event study methodology since 1969. Review of Quantitative Finance and Accounting, 11(2), 111-137.

  • Bowman, R. (2006). Understanding and conducting event studies. Journal of Business Finance and Accounting, 10(4), 561-584.

  • Brown, S., & Warner, J. (1980). Measuring security price performance. Journal of Financial Economics, 8(3), 205-258.

  • Brown, S., & Warner, J. (1985). Using daily stock returns; the case of event studies. Journal of Financial Economics, 14 (1), 3-31.

  • Bruck, T., & Wickstrom, B.A. (2004). The economic consequences of terror: guest editors introduction. European Journal of Political Economy, 20(2), 293-300.

  • Cam, M.A. (2007). The impact of terrorist attacks on financial markets (master thesis). RMIT University, Melbourne, Australia.

  • Campbell, J., Lo, W., & MacKinlay, G. (1997). The Econometrics of Financial Markets. New Jersey: Princeton University Press.

  • Chandra, R., Moriarity, S., & Willinger, L. (1990). A reexamination of the power of alternative return-generating models and effect of accounting for cross-sectional dependencies in event studies. Journal of Accounting Research, 28(2), 398-408.

  • Chen, A., & Siems, T. (2004). The effects of terrorism on global capital markets. European Journal of Political Economy, 20(2), 349-366.

  • Chesney, M., Reshetar, G., & Karaman, M. (2011). The impact of terrorism on financial markets: an empirical study. Journal of Banking and Finance, 35 (2), 253-267.

  • Colman, L. (2012). Testing equity market efficiency around terrorist attacks. Applied Economics, 44(31), 4087-4099.

  • Corrado, C., & Zivney, T. (1992). The specification and power of the sign test in event study hypothesis tests using daily stock returns. Journal of Financial and Quantitative Analysis, 27(3), 265-478.

  • Dimson, E., & Mussavian, M. (1998). A brief history of market efficiency. European financial management, 4(1), 91-19

  • Dolley, J. (1933). Characteristics and procedure of stock common stock split ups. Harvard Business Review, 11(3), 316-326.

  • Drakos, K. (2010). Terrorism activity, investor sentiment and stock returns. Review of Financial Economics, 19 (3), 128-135

  • Enders, W., & Sandler, T. (2006). Terrorism and foreign direct investment in Spain and Greece. Kyklos International Review of Social Sciences, 49(3), 331-352.

  • Fagerland, M. (2012). T-tests, non parametric tests, and large studies- a paradox of statistical practice? BMC Medical Research Methodology, 12(1), 78-84

  • Fama, E. (1970). Random walks in stock market prices. Financial Analysts Journal, 51(1), 75-80.

  • Fama, E. (1991). Efficient capital markets: II. The Journal of Finance, 46(5), 1575-1617.

  • Fama, E., Lawrence, F., Michael, J. & Richard, R. (1969). The Adjustment of Stock Prices to New Information. International Economic Review, 10(1), 1-21.

  • Hameed, A., Ashraf, H., & Siddiqui, R. (2006). Stock market volatility and weak-form efficiency: evidence from an emerging country. The Pakistan Development Review, 45(4), 1029-1040.

  • Hua, L. & Ramesh, S. (2013). A study on stock split announcements and its impact on stock prices in Colombo stock exchange (CSE) of Sri Lanka. Global Journal of Management and Business Research Finance, 13(6), 25-34.

  • Karolyi, G.A., & Martell, R. (2006). Terrorism and the stock market. International Review of Applied Financial Issues and Economics, 2(2), 285-314.

  • Kollias, C., Papadamou, S., & Arvanitis, V. (2013). Does terrorism affect the stockbond covariance? Evidence from European countries. Southern Economic Journal, 79 (4), 832-548.

  • Lardic, S., & Mignon, V. (2003). Analyse intraquotidienne de l’impact de “news” sur le marché boursier francais. Economie appliquée (Paris), 56 (2), 205-237.

  • Lo, A., & MacKinlay, A. C. (1988). Stock market prices do not follow random walks: evidence from a simple specification test. The review of Financial Studies, 1(1), 41-66.

  • Rehman, A., Luqman, M., & Suleman M. U. (2011, September 16). Evaluation of semi strong form of efficiency: an empirical study on Karachi stock exchange with respect to natural disasters and terrorism effects. Available at SSRN:

  • Malkiel, B. (2003). The efficient market hypothesis and its critics. Journal of Economic Perspectives, 17(1), 59-82.

  • Mallikarjunappa, T., & Dsouza, J.J. (2013). A study of semi-strong form of market efficiency of Indian stock market. Amity Global Business Review, 8, 60-68.

  • Nikkinen, J., Omran, M., Sahlstrom, P, & Aijo, J. (2008). Stock returns and volatility following the September 11 attacks: Evidence from 53 equity markets. International Review of Financial Analysis, 17 (1), 27-46.

  • Peterson, P. (1989). Event studies: a review of issues and methodology. Quarterly Journal of Business and Economics, 28(3), 36-66.

  • Ross, S. (1976). The arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), 341-360.

  • Ryland, P (2009). Essential Investment: an A-Z guide (2nd ed.). New York: Bloomberg Press

  • Schwert, G.W. (2003). Anomalies and market efficiency. Handbook of the Economics and Finance, 1(B), 939-974.

  • Suleman, M. (2012). Stock market reaction to terrorist attacks: Empirical evidence from a front line state. Australasian Accounting Business and Finance Journal, 6(1), 97-110.

  • Todd, T. (2016, January 12). French 2015 terror attacks a “dress rehearsal” for 2016, experts say. France 24. Retrieved from


Journal + Issues