Abstract:
The objective of this study is to analyze the effect of the COVID-19 outbreak on the financial sector's equity returns, specifically focusing on Sukuk & Bonds (TSBI), Diversified Financials (TDFI), Banks (TBNI), Insurance (TISII), and the Tadawul All Share (TASI) Index. This is done through the utilization of t-test and event study technique. The event takes place from December 2018 to March 2020. The estimation period covers the time frame from December 2018 to December 2019. The pre-announcement phase of the WHO notice spans the month of January 2020, while the post-announcement phase encompasses February 2020 to March 2020. The study suggests that, prior to the alarm given by the WHO, the majority of the financial sector exhibits positive returns, with the exception of Banks. The results validate the substantial and adverse influence of the COVID-19 epidemic on Diversified Financials (TDFI), Banks (TBNI), and Insurance (TISII) following the global alert notice by the World Health Organization (WHO). The study indicates that the Sukuk & Bonds (TSBI) sector remains unaffected by the epidemic and shows a favorable influence on returns. This industry provides a fixed interest rate and does not influence the expectations of investors. Saudi Arabia's government announces a stimulus package of $18.7 billion on March 20, 2020. The adverse consequences suggest that the policymakers fail to foresee this issue and do not take timely action. This study recommends that effective policies must be designed by policymakers in anticipation of such pandemic outbreaks to help investors devise diversification strategies.