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COVID-19 and GCC stock market performance: an analysis of the boon (financial stimulus package) and curse (oil price plunge) effects

Shinaj Valangattil Shamsudheen (Putra Business School, Universiti Putra Malaysia, Selangor, Malaysia)
Mudeer Ahmed Khattak (Department of Business Administration, Iqra University Islamabad Campus, Islamabad, Pakistan)
Aishath Muneeza (International Centre for Education in Islamic Finance, Kuala Lumpur, Malaysia)
Makeen Huda (Department of Accounting and Finance, Nicholls State University, Thibodaux, Louisiana, USA)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 4 March 2022

Issue publication date: 19 April 2022

328

Abstract

Purpose

This study aims to investigate the reaction (in terms of returns and volatility) of Gulf Cooperation Council (GCC) country-wise stock markets (both conventional and Islamic) in response to the surge of COVID-19 cases, with special reference to the announcement of financial stimulus packages in each country and the recent global oil price plunge. Further, the study also examines the impact of COVID-19 cases on the stock market returns of each GCC country and the continuous dynamics of correlation between COVID-19 cases and GCC stock markets.

Design/methodology/approach

This study uses an exponential generalized auto regressive conditional heteroskedasticity model and continuous wavelet coherence to estimate the stock market volatility and co-movement between COVID-19 cases and stock returns.

Findings

Empirical findings indicate an adverse reaction (negative returns and high volatility) during the period examined, with the stimulus package resulting in a positive transformation of returns in each country-level stock market as well as the regional stock index. Further, no evidence of an adverse effect of the oil price plunge is identified. All findings are identical between both conventional and Islamic stock indices.

Originality/value

While ample research has been conducted on the impact and dynamics of the pandemic on stock markets, little has addressed the areas of financial stimulus packages and the oil price plunge. The findings of this study show that further research needs to be conducted to elucidate the ways in which effective financial stimulus packages can be formulated in the GCC region to mitigate the adverse effects of COVID-19 for economies without causing major financial deficits, as well as to find strategies to diversify economies away from the oil curse.

Keywords

Citation

Shamsudheen, S.V., Khattak, M.A., Muneeza, A. and Huda, M. (2022), "COVID-19 and GCC stock market performance: an analysis of the boon (financial stimulus package) and curse (oil price plunge) effects", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 2, pp. 223-235. https://doi.org/10.1108/IMEFM-01-2022-0002

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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