Assessing terrorist risk and FDI using relative information measures

Recent research has explored the determinants of terrorism and the impact that terrorist activity has on a country. However, to date, no research has examined what specific aspect of terrorist risk most significantly impacts a country's ability to operate in the global market. Using the five sub-indices of the World Market Research Center's Global Terrorism Index, this study explores how the different dimensions of terrorist risk impact the inflow of Foreign Direct Investment (FDI) using a Shannon information measure of relationship. The results of this research suggest that a country's proven ability to prevent terrorist activity has the most significant impact on investment decisions in regard to FDI.