How Terrorism Strikes Financial Markets: Evidence from the 1920 Wall Street Bombing

The late 19th and early 20th century witnessed a range of violent attacks by anarchist terrorists. This paper focuses on the 1920 Wall Street bombing, as its context allows for a direct measurement of how targets of anarchists (in this case, stock market investors) reacted to such violence. Even though the New York stock market as a whole remained resilient after the bombing, this paper finds indications of heterogeneity across types of U.S. listed firms. In particular, stocks of firms with patriotic names underperformed by around 1 percent point on the day after the attack. This small yet significant underperformance suggests a narrative in which investors interpreted the 1920 bombing mostly as an attack against the nation. Thus, propaganda of the deed may have more subtle effects on investors than a cursory glance at overall stock market reactions often suggests.