Thursday, August 10, 2006

Stock Prices and Terror

Does today's thwarted terrorist attack remove the implicit terrorist discount from the US equities markets? I occasionally see it said that ever since the attacks of 9/11, that the market prices in the threat of terrorist attacks. This means that all else being equal, stocks trade at a lower price than they otherwise would, because they are pricing in the threat to company profits resulting from future terrorism.

If this was intended to be the next big follow-up to 9/11 then it took them almost 5 years to put it in place and they were completely stopped by the authorities. Does this give us at least another 5 years before we have to worry about another big attack?


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