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

• Published in: Journal of economic asymmetries Vol. 30; p. e00374
• Main Authors: Eissa, Mohamed Abdelaziz, Al Refai, Hisham, Chortareas, Georgios
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.11.2024
• Subjects: Emerging markets; Geopolitical risks; Middle east region; Quantile regression; Stock market performance; Geopolitical risks; F51; Middle east region; Emerging markets; H56; G15; F59; Stock market performance; Quantile regression; G18
• ISSN: 1703-4949
• DOI: 10.1016/j.jeca.2024.e00374

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.