Geopolitical risk and the Saudi stock market: Evidence from a new wavelet packet multiresolution cross-causality

ABSTRACT

Recently, due to OPEC Plus cutting oil production, geopolitical tensions have escalated between the United States and Saudi Arabia. We explore the relationship between geopolitical risk and the Saudi stock market, developing a deep cross-causality approach based on wavelet methodology. Our sample includes Brexit, COVID-19, and the Russian-Ukrainian war. We identify causal patterns especially during times of crisis, evidencing one-way causality of geopolitical factors impacting the Saudi market. Scholars and policymakers will be interested in the sensitivity of the Saudi market to geopolitical risk.