Decisions regarding the role of bad news and asymmetric effects in the Middle East stock markets

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Abstract

This paper aims to study the impact of the COVID-19 pandemic, the Russian invasion of Ukraine, and the Turkey-Syria earthquake on the Middle East’s developed, emerging, and frontier markets. For this purpose, panel data of nine Middle East financial markets listed in Morgan Stanley from January 2, 2018, to July 27, 2023, were analyzed using multi criteria. In the event study, two approaches were deducted to analyze the price impact: 1) a standard event study and 2) an independent sample, following Brown and Warner (1985). The generalized autoregressive conditional heteroskedasticity (GARCH) group captures asymmetric and leverage effects. The results show volatility in financial market index returns and the impact of bad news and leverage in all markets. However, this effect is asymmetric across markets, indicating a low integration. Moreover, the negative impact of COVID-19 was more pronounced than that of both the Russian invasion of Ukraine and the Turkey-Syria earthquake. This study’s findings can help investors make informed investment decisions and select optimal portfolios. It will also add to the existing body of knowledge by shedding new light on the factors that influence stock price volatility and risk management in Middle Eastern international fiscal issues.

Keywords: Financial Risk, COVID-19, Russian Invasion of Ukraine, Turkey-Syria Earthquake, Event Studies, GARCH Group

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: C22, D53, G10, G14, G32, N25

Received: 23.02.2024
Accepted: 25.06.2024
Published online: 28.06.2024

How to cite this paper: AlHalaseh, R. H. (2024). Decisions regarding the role of bad news and asymmetric effects in the Middle East stock markets. Risk Governance and Control: Financial Markets & Institutions, 14(2), 120–137. https://doi.org/10.22495/rgcv14i2p12