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Heterogeneous impacts of geopolitical risk factors on stock markets in the Middle East: A quantile regression analysis across four emerging economies

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  • Eissa, Mohamed Abdelaziz
  • Al Refai, Hisham
  • Chortareas, Georgios

Abstract

This study investigates the heterogeneous impacts of eight categories of geopolitical risk on stock market performance across different market conditions in four Middle Eastern economies: Egypt, Israel, Saudi Arabia, and Turkey. Utilizing Quantile regression analysis and datasets spanning from September 2002 to August 2023, our findings reveal the complex and varied relationships between geopolitical risk factors and stock market performance. These results underscore the significance of comprehending specific political risk factors and their influence under various market conditions. We observe a consistent negative relationship between military buildups and stock market performance in Egypt and Israel, while other categories exhibit mixed effects. The Saudi Arabian and Turkish markets demonstrate varied sensitivity to different risks, with terrorism and war-related events significantly affecting market dynamics. Notably, all four markets consistently displayed negative reactions to terrorist activities, indicating the universally disruptive nature of such events. Understanding these dynamics assists investors and policymakers in adapting to global political changes.

Suggested Citation

  • Eissa, Mohamed Abdelaziz & Al Refai, Hisham & Chortareas, Georgios, 2024. "Heterogeneous impacts of geopolitical risk factors on stock markets in the Middle East: A quantile regression analysis across four emerging economies," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    • Handle: RePEc:eee:joecas:v:30:y:2024:i:c:s1703494924000239
    DOI: 10.1016/j.jeca.2024.e00374
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    Keywords

    Geopolitical risks; Stock market performance; Quantile regression; Emerging markets; Middle east region;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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