1. capital stock (human and physical) of a country is reduced as a result of terrorist attacks;
2. terrorist threat induces higher levels of uncertainty;
3. promotes increases in counter-terrorism expenditures, drawing resources from productive sectors for use in security;
4. affects negatively specific industries (e.g., tourism).

This is minimized, obviously, if the threat is widely diffused; New York City is obviously a target, and so was London and Washington, DC; however, most US nationals and Western Europeans appear to regard their own communities as vulnerable to terrorism. It would appear that economic liquidity of the affected country is rather important:

In the empirical section of this article, we use a measure of terrorism risk at the country level to study the effect of terrorism on international investment positions. We choose to investigate the effect of terrorism on international investment positions rather than on capital flows for two reasons. First, while measures of terrorism risk in the cross-section of countries exist, we currently lack the longitudinal risk data needed to conduct a direct study of capital flows. Additionally, the equilibrium portrayed by our model can be interpreted as a description of the long-run relationship between terrorism risk at the country level and international investment positions. Because the AK growth model lacks transitional dynamics, it cannot effectively describe short run capital movements.

In order to simplify our empirical analysis, we restrict our attention to direct investment. Debt and portfolio investment are heavily affected by financial crises and complicated capital control schemes. In addition, as explained in the following section, country level data on foreign direct investment are readily available for the sample period considered here. The same is not true yet for debt and portfolio investment.

This has little effect on the results, though, since it's the longer-term results that matter anyway and the response of portfolio investment to terror attacks is more likely to be situation-specific. In order to assess the impact of terror, they use the Global Terrorism Index, which gets around the problem of comparing heterogenous atrocities: "terrorism is [treated] not simply a history of violence and its direct effects on economic systems, but a environmental variable of complex composition representing latent increases in uncertainty and instability" (p.11).

The conclusions were unfortunately very weak. Yes, there is a high T-value for the GTI coefficient (i.e., the study confidently establishes that terror has some negative impact on FDI). But this impact is very small, and the model has a very low R². The authors try to prove that robust financial institutions are good because they enable countries to survive terror attack with a healthy economy. But that's not how robust financial institutions help the economy.

I'm going to have to stick to my original opinion, that the main impact of terrorism is that it causes nations to chuck transparency and state accountability. That's what explains why terrorist targets so often stay poor.

ADDITIONAL RESEARCH: Abadie & Gardeazabal refer to "The effects of terrorism on global capital markets" (PDF), by Andrew H. Chena & Thomas F. Siems (2004); this paper focuses on the performance of US financial markets between 1915 and 2001:

We conclude that terrorist attacks and military invasions have great potential to effect capital markets around the world in a short period of time. In today’s information-oriented world, news travels very fast and contagion can spread quickly.We find evidence, however, that U.S. capital markets seem to have become more resilient and are better able to absorb shocks brought on by such events. We also find evidence that an economy’s banking/ financial sector seems to be an important force in returning markets to relative stability.

Terrorism had a significant and persistent negative impact on net foreign direct investment—a year's worth of terrorism discouraged net foreign direct investment by 13.5 percent annually in Spain and by 11.9 percent annually in Greece. The cumulative effect on foreign-held capital is indicated. It shows that smaller countries that face a persistent threat of terrorism may incur economic costs in the form of reduced investment and growth.

A frequently used indicator is the number of terrorist incidents. However, counting the number of terrorist incidents means that terrorist activities of widely varying magnitude are lumped together. The attacks on the World Trade Center would be counted as one (or perhaps two) event(s), the same as taking one person as a hostage. Such measurements can capture developments in terrorism only if the structure of terrorist events remains more or less unchanged.
[p.4]

Another problem is that only those terrorist events reflected in official statistics and reported in the media are counted. Reliance on official statistics is often mistaken, because either the authorities themselves do not know or deliberately bias their reporting. The media only pick up on some terrorist events, mostly those occurring in the larger cities or the capital of the country, where the foreign journalists normally reside. Terrorist action taking place in remote rural areas is rarely, if ever, reported in the media.
[p.5]

...A third of those Americans interviewed said they would refuse the opportunity to travel abroad because of the risk of terrorism (Downes-Le Guin and Hoffman 1993). It is hard to think of similar precautionary measures against life-threatening eventualities taking place with the same likelihood. More generally, Viscusi and Zeckhauser (2003) find that people are subject to a propensity to predict worst-case scenarios in assessing terrorism risks and are prone to anomalies known from other risk perception contexts.
[p.11]