FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11

J.W.B. Bos, M. Frömmel, M. Lamers

Research output: Working paperProfessional

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Abstract

We record the existence of an availability heuristic that is reflected in disaster myopia of U.S. investors and exists prior to the attacks of 9/11. We argue that this is fueled by an aggregate experience hypothesis effect, resulting in a pronounced increase in the sensitivity of U.S. stock prices to terrorist attacks on foreign soil. After 9/11, stock prices react proportionally to the size of an attack and the share of FDI stock held in the region by the sector in which firms operate. This effect, non-existent prior to 2002, has become increasingly strong in recent years.
Original languageEnglish
Place of PublicationMaastricht
PublisherMaastricht University, Graduate School of Business and Economics
DOIs
Publication statusPublished - 1 Jan 2013

Publication series

SeriesGSBE Research Memoranda
Number047

Cite this

Bos, J. W. B., Frömmel, M., & Lamers, M. (2013). FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11. Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 047 https://doi.org/10.26481/umagsb.2013047