The Impact of Terrorist Attacks on Sovereign Bond Yield Spreads of Targeted Countries

Slava Rar, University at Albany, State University of New York


This study estimates the effects of terrorism incidents on a nation’s borrowing costs. An event study approach is used to evaluate changes in sovereign-bond yield spreads after terrorist attacks occur. Prior research is not in consensus on whether the effect of terrorism on bond markets is significant, and no study shows why certain bond indices may rise while others may fall after a terrorist attack. This study does not find statistical significance, which suggests that the effect of an attack may depend on the targeted country. For terrorist researchers, this study is one s