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Bank Stock Return Reactions to the COVID-19 Pandemic: The Role of Investor Sentiment in MENA Countries

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  • Mohamed Albaity

    (Department of Finance and Economics, College of Business Administration, University of Sharjah, Sharjah 27272, United Arab Emirates)

  • Ray Saadaoui Mallek

    (Department of Finance and Economics, College of Business Administration, University of Sharjah, Sharjah 27272, United Arab Emirates)

  • Hasan Mustafa

    (Business Division, Higher Colleges of Technology, Sharjah 27272, United Arab Emirates)

Abstract

In this study, we investigated the impact of COVID-19 investor sentiment (CS), number of cases (CC), and deaths (CD) on bank stock returns in 16 MENA countries. In addition, we examined the interaction effects of CS with CC and CD on bank stock returns. Lastly, we looked at whether Islamic banks outperformed conventional banks during the pandemic. Based on monthly data from the Middle East and North Africa (MENA) countries from February 2020 to July 2021, we used the clustered standard error fixed effect estimation on Islamic and conventional bank stock market returns. The results suggest that CC and CD have negative impacts on bank stock market returns while CS has no effect, except for the lagged value. The interaction effect of CS with CC and CD on stock returns proved to strengthen the link in the current month and weaken the link in the previous month.

Suggested Citation

  • Mohamed Albaity & Ray Saadaoui Mallek & Hasan Mustafa, 2022. "Bank Stock Return Reactions to the COVID-19 Pandemic: The Role of Investor Sentiment in MENA Countries," Risks, MDPI, vol. 10(2), pages 1-15, February.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:2:p:43-:d:752591
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    1. Saadaoui Mallek, Ray & Albaity, Mohamed & Molyneux, Philip, 2022. "Herding behaviour heterogeneity under economic and political risks: Evidence from GCC," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 345-361.
    2. Beata Bieszk-Stolorz & Iwona Markowicz, 2022. "Changes in Share Prices of Macrosector Companies on the Warsaw Stock Exchange as a Reaction to the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    3. Faeezah Peerbhai & Damien Kunjal, 2024. "The Impact of COVID-19 on Banking Sector Returns, Profitability, and Liquidity in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 146-151, March.
    4. Albaity, Mohamed & Shah, Syed Faisal & Al-Tamimi, Hussein A.Hassan & Rahman, Mahfuzur & Thangavelu, Shanmugam, 2023. "Country risk and bank returns: Evidence from MENA countries," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).

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