The End of GCC Crisis and its Impact on the Saudi Stock Exchange: An Event Study Approach

International Journal of Economics and Management Studies
© 2023 by SSRG - IJEMS Journal
Volume 10 Issue 8
Year of Publication : 2023
Authors : Somaiyah Alalmai
pdf
How to Cite?

Somaiyah Alalmai, "The End of GCC Crisis and its Impact on the Saudi Stock Exchange: An Event Study Approach," SSRG International Journal of Economics and Management Studies, vol. 10,  no. 8, pp. 1-6, 2023. Crossref, https://doi.org/10.14445/23939125/IJEMS-V10I8P101

Abstract:

In this research paper, we investigate the impact of the Qatari-Saudi reconciliation on the Saudi stock market return by implementing an event study approach. To analyze the event's effect, we calculate the abnormal return and the cumulative abnormal return around the announcement date using two methods. First, we apply the mean-adjusted returns model, then the OLS market model. The empirical evidence shows that the initial market reaction is negative; however, the estimated CARs are insignificant in most event windows other than for [−1, 1], [−2, 2], and [−3, 3]. The results highlight the limited economic effects experienced by Saudi Arabia.

Keywords:

Event study, GCC stock markets, Market reaction, Qatar blockade, Saudi Arabia.

References:

[1] Ahmad Bash, Khaled Alsaifi, and Abdullah M.Al-Awadhi, "Failed Terror Attack and Stock Market Returns: The Case of Pakistan Stock Exchange," Applied Economics Letter, vol. 28, pp. 1698-1702, 2020.
[CrossRef] [Google Scholar] [Publisher Link]
[2] Malcolm Basker, and Jeffrey Wurgler, "Investor Sentiment and the Cross-section of Stock Returns," Journal of Finance, vol. 61, no. 4, pp. 1645-1680, 2006.
[CrossRef] [Google Scholar] [Publisher Link]
[3] Malcolm Basker, and Jeffrey Wurgler, "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, vol. 21, no. 2, pp. 129–152, 2007.
[CrossRef] [Google Scholar] [Publisher Link]
[4] Henk Berkman, Ben Jacobsen, and John B. Lee, "Time-Varying Rare Disaster Risk and Stock Returns," Journal of Financial Economics, vol. 101, no. 2, pp. 313–332, 2011.
[CrossRef] [Google Scholar] [Publisher Link]
[5] Jamal Bouoiyour, and Refk Selmi, "The Changing Geopolitics in the Arab World: Implications of the 2017 Gulf Crisis for Business," The 25th ERF Annual Conference, Kuwait, 2019.
[CrossRef] [Google Scholar] [Publisher Link]
[6] J. Bouoiyour, and R. Selmi, "The Qatar-Gulf Crisis and Risk Management in Oil and Gas Markets," Hal Working Paper, No. Hal-02101633, 2019.
[Google Scholar] [Publisher Link]
[7] Gregory W. Brown, and Michael T. Cliff, "Investor Sentiment and Asset Valuation," Journal of Business, vol. 78, no. 2, pp. 405–440, 2005.
[CrossRef] [Google Scholar] [Publisher Link]
[8] S. J. Brown, and J. B. Warner, "Using Daily Stock Returns: The Case of Event Studies," Journal of Financial Economics, vol. 14, no. 1, pp. 3-31, 1985.
[CrossRef] [Google Scholar] [Publisher Link]
[9] Steven Buigut, and Burcu Kapar, "Effect of Qatar Diplomatic and Economic Isolation on GCC Stock Markets: An Event Study Approach," Finance Research Letters, vol. 37, p. 101352, 2020.
[CrossRef] [Google Scholar] [Publisher Link]
[10] Charfeddine Lanouar, and Mohamed Goaied, "Tourism, Terrorism and Political Violence in Tunisia: Evidence from Markov-Switching Models," Tourism Management, vol. 70, pp. 404–418, 2019.
[CrossRef] [Google Scholar] [Publisher Link]
[11] Radwa Radwan Said, "The Effects of American Monetary Policy on GCC Economies," SSRG International Journal of Economics and Management Studies, vol. 6, no. 9, pp. 121-125, 2019.
[CrossRef] [Google Scholar] [Publisher Link]
[12] Peter Dodd, and Jerold B. Warner, "On Corporate Governance: A Study of Proxy Content," Journal of Financial Economics, vol. 11, no. 1-4, pp. 401–438, 1983.
[CrossRef] [Google Scholar] [Publisher Link]
[13] Thomas Dyckman, Donna Philbrick and Jens Stephan, "A Comparison of Event Study Methodologies Using Daily Stock Returns: A Simulation Approach," Journal of Accounting Research, vol. 22, pp. 1–30, 1984.
[CrossRef] [Google Scholar] [Publisher Link]
[14] Eugene F. Fama, "Efficient Capital Markets: A Review of Theory and Empirical Work," The Journal of Finance, vol. 25, no. 2, pp. 383- 417, 1970.
[CrossRef] [Google Scholar] [Publisher Link]
[15] Sanjay Goel, Seth Cagle, and Hany Shawky, "How Vulnerable are International Financial Markets to Terrorism? An Empirical Study Based on Terrorist Incidents Worldwide," Journal of Financial Stability, vol. 33, pp. 120–132, 2017.
[CrossRef] [Google Scholar] [Publisher Link]
[16] Yinghua He, Ulf Nielsson, and Yonglei Wang, "Hurting Without Hitting: The Economic Cost of Political Tension," Journal of International Financial Markets, Institutions and Money, vol. 51, pp. 106–124, 2017.
[CrossRef] [Google Scholar] [Publisher Link]
[17] J. Holler, "Event-Study Methodology and Statistical Significance," Oldenburg, Germany: O1WIR Publisher for Economics," Computer Science and Law, 2014.
[18] A. Kongprajya, "An Analysis of the Impact of Political News on Thai Stock Market," MA (Res) thesis, University of Nottingham, Nottingham, England, 2010.
[Google Scholar] [Publisher Link]
[19] Lanouar Charfeddine, and Hisham Al Refai, "Political Tensions, Stock Market Dependence and Volatility Spillover: Evidence from the Recent Intra-GCC Crises," The North American Journal of Economics and Finance, vol. 50, 2019.
[CrossRef] [Google Scholar] [Publisher Link]
[20] Heikki Lehkonen, and Kari Heimonen, "Democracy, Political Risks and Stock Market Performance," Journal of International Money and Finance, vol. 59, pp. 77–99, 2015.
[CrossRef] [Google Scholar] [Publisher Link]
[21] Ayman Mnasri, and Salem Nechi, "Impact of Terrorist Attacks on Stock Market Volatility in Emerging Markets," Emerging Markets Review, vol. 28, pp. 184–202, 2016.
[CrossRef] [Google Scholar] [Publisher Link]
[22] Afef Trabelsi Mnif, "Political Uncertainty and Behavior of Tunisian Stock Market cycles: Structural Unobserved Components Time Series Models," Research in International Business and Finance, vol. 39, pp. 206–214, 2017.
[CrossRef] [Google Scholar] [Publisher Link]