Analyzing the Economic and Financial Impacts of Terrorism on Return of Tehran Stock Exchange Price Index

Tehran Stock Exchange, as a symbol of capital market, is influenced by various factors, including economic and political variables. Terrorism incidents a primary political variable affecting on stock market, it is necessary to clarify in what way it puts influence on stock exchange. The main purpose of this study is to consider the effect of terrorism on the return of TSE price index (Tepix). Regarding the purpose of the study, terrorism and return of Tehran stock exchange index are considering independent and dependent variables, respectively; moreover, items like rate of exchange, world price of gold, and the price of Iran’s heavy oil, are controlled variables. Required data were collected in a weekly interval between 2002 and 2014. An EGARCH model is applied to examine the impact of terrorism on stock market. Results showed that terrorism had a significant negative effect on the return of TSE price index.