How Did Geopolitical Risks and COVID-19 Influence the Dynamics of Herding Behavior in MENA Stock Markets?

This study examines herding behavior in six MENA stock markets, with a focus on the impact of geopolitical risks and downward/upward market conditions during COVID-19/non-COVID-19 periods. Empirical results reveal significant differences among MENA countries regarding herding behavior and the impact of geopolitical events. We conclude that herding was more pronounced during the COVID-19 pandemic, especially during downward markets. Additionally, we found that geopolitical risks further amplified herding during dramatic market periods, particularly at lower quantiles. An exception was the Saudi stock market, which exhibited resilience to geopolitical risks, likely due to strong government support and robust policies. In contrast, Lebanon’s stock market has been exposed to an increased herding due to political instability. These findings suggest that regulators should enhance mechanisms to monitor market activities and introduce efficient policies to mitigate systematic risk and strengthen financial stability during downturns.