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This paper examines the impact of terrorism on volatility of stock returns over 17 market indices between 1994 and 2005. Using a volatility event study approach methodology, we find that terrorism has a significant impact on the stock market volatility. We also propose a new semiparametric bootstrap technique which consists in re-sampling the rescaled residuals obtained from the estimations of GARCH equations before the event and using a moving block approach where the residuals are chosen in a chronologically consecutive manner each time we generate a bootstrap sample. This technique provides a better way to perform inference that is more reliable on finite samples than inference based on conventional asymptotic theory.

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