The Impact of COVID-19 News on Financial Market Volatility in MENA Countries

Oumayma Elbach, Abdelkader Mohamed Sghaier Derbali and Moufida Ben Saada

Chapter 5 in Handbook of Banking and Finance in the MENA Region, 2024, pp 113-145 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter examines the impact of COVID-19 news in the USA on the volatility of financial markets in the Middle East and North Africa (MENA) zone. We examine the effect of surprises from financial markets announcements relating to new, confirmed, and death cases of COVID-19 in each country in the sample. We use the GARCH (1.1) specification by incorporating the surprise component in the estimated model during the period from January 1, 2019 until December 31, 2020. The empirical findings show that the evolution of the daily returns and volatilities of the stock indexes of the MENA zone used in our research shows very significant peaks in particular in the first three months of 2020 during the most significant spread of the COVID-19 epidemic. We show that the announcements of new cases of COVID-19 in the United States (NCUSA) have a significant impact on the Lebanon stock index and on Tunisia’s stock index. Announcements of confirmed cases (CCUSA) of COVID-19 present a relative and insignificant impact on all stock market indices of the MENA zone used in our research. Finally, the announcements of the death cases of COVID-19 in the United States (DCUSA) have a significant impact on the stock market index of Morocco, Saudi Arabia, and United Arab Emirates. This chapter is the first to examine the effect of surprises from financial markets announcements relating to new, confirmed, and death cases of COVID-19 on the volatility of financial markets in the MENA zone.

Keywords: MENA; Banking Sector; Business Risk; Corporate Governance; COVID-19; Cryptocurrency; Fintech; Financial Stability; Green Finance (search for similar items in EconPapers)
JEL-codes: F3 G2 G3 (search for similar items in EconPapers)
Date: 2024
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