Resilience Amidst Turbulence: Unraveling COVID-19’s Impact on Financial Stability through Price Dynamics and Investor Behavior in GCC Markets

Conducted within the backdrop of the COVID-19 pandemic, the paper rigorously investigates the influence of this global crisis on the foreign stock markets of diverse GCC countries. Our research employs a multifaceted approach, combining an adjusted correlation test across six distinct stock markets over a substantial timeframe—from January 2, 2001, to April 31, 2021. Employing sophisticated methodologies including FIEGARCH (1.1), DCC-MGARCH(1,1), and Switching-Markov analyses, we intricately scrutinize the impact of the pandemic on these markets. Our comprehensive analysis uncovers compelling evidence demonstrating the pandemic’s profound effects across the majority of GCC countries’ markets. Notably, these markets exhibit an increased vulnerability to the negative repercussions induced by the COVID-19 crisis. The implications stemming from these findings are far-reaching, particularly in the realm of financial policy-making, risk assessment, asset valuation, and portfolio management strategies. Understanding the heightened susceptibility of these markets during financial downturns is crucial for policymakers, investors, and portfolio managers, empowering them with critical insights to navigate and formulate informed strategies amidst such challenging times.