Are markets in happier countries less affected by tragic events? Evidence from market reaction to the Israel–Hamas conflict

Abstract

Do happier people care more, or less, about other people's problems? Indirectly to this question we investigate whether markets in happier countries are less affected by tragic events. Using a sample of 71 global stock market indices, we employ an event study method to analyze the immediate impact of the Israel–Hamas conflict on stock market returns. We find that stock indices from happier nations are more resilient to this geopolitical event. While the overall cumulative effect of the war remained largely negative, the Europe, Middle East, and Africa markets demonstrated heightened vulnerability to the conflict.