Assessing the Effects of COVID-19 on Stock Markets in the GCC Countries: Evidence from Sector-wise Panel Data Analysis

ABSTRACT

This paper investigates the effect of the COVID-19 on the stock prices in service, industrial, and financial sectors using daily data for 295 companies from January 1, 2020, to February 23, 2021, in the GCC countries. The panel data techniques are utilized based sector-wise in each country random-effect model, fixed-effect model, and Hausman test. The impact of COVID-19 was analysed during two phases. The first phase included analysing the financial markets' response from 01-01-2020 to 30-07-2020. The second phase is the analysis of the financial market response from 01-08-2020 to 23-02-2021. The first phase of results show that the COVID-19 outbreak leads to decreasing stock market prices in GCC countries. The empirical results show that the COVID-19 outbreak has badly hit the stock markets in Saudi Arabia, United Arab Emirates, and Qatar while the stock markets in Bahrain, Kuwait, and Oman are the least impacted countries in GCC. Furthermore, the sector-wise analysis results reveal that the financial sector in Saudi Arabia is the most affected by the COVID-19 outbreak in GCC countries. However, the response of stock markets to COVID-19 varied over time. The second phase's findings confirm that the negative impact of COVID-19 on stock markets in the GCC countries has faded in most sectors due to government support.