This research explores the impact of COVID-19 on the GCC index, stock market and oil yield. Corporate tax has a short-term effect on the UAE and Oman index returns and has a short-term effect on the UAE and Qatar oil returns. VAT has a short-term effect on SA and Oman index returns and has a short-term effect on Bahrain oil returns.
In addition, VAT and corporate income tax have more of an impact than COVID-19 on the long-term GCC oil declaration.
List of Tables
List of Equations
Nomenclature
Chapter One- Introduction 1.1 Background
COVID-19
The VAT is transferred to the public sector; it is produced by consumers and businesses that sell goods and services. VAT is expected on two types of products, while the rate is 50% on soft drinks and 100% on energy drinks and tobacco products. Different percentage of taxes for the following items: 100% on tobacco and tobacco products, electronic smoking devices and energy drinks and 50% on carbonated drinks and sweetened drinks.
Different tax percentages for the following goods: 100% on tobacco and its derivatives, 50% on carbonates and soft drinks and 100% on energy drinks.
Corporate Tax
GCC Corporate Tax History
- Problem statement
- Scope of the study
- Research objective
- Research Questions
- Thesis Hypothesis
- Research contribution
- Organization of the Study
H0: There is no short-term impact of COVID-19 on the return of the GCC index. H0: There is no long-term impact of COVID-19 on the return of the GCC index. H0: There is no impact of COVID-19 on GCC oil yield in the short term.
H0: There is no long-term impact of COVID-19 on GCC oil return.
Chapter two-Literature review
- Policy
- Corporate tax
Many scholars have responded to the urgent need for research on the global economy and international financial markets and the impact of the COVID-19 pandemic on them. Several countries provided their enterprises with unprecedented loan guarantees and other forms of credit support (Bennedsen et al., 2020). The purchase of corporate bonds by the government, sometimes accompanied by loan guarantees, has been a critical tool to inject liquidity into affected businesses (Alstadsaeter et al., 2020). Second, GCC countries are currently experiencing a double shock from the COVID-19 pandemic and the collapse of oil prices.
In the past, several studies have examined the impact of public information on the stock market (Gupta, Gedam, 2014).
Chapter Three-Data and Methodology 3.1 Methodology
Event Study
With the constant return model, we can calculate the expected returns each day during the event. To get the abnormal return for each day in the event window, we will subtract the expected return from the actual return. Each variable for each country has a specific date for each event that must be specified in the model.
Also calculate the standard deviation of the entire event (estimate period, anticipation, adjustment, and event day), 30 days (anticipation) of the event, and 61 days (anticipation, adjustment, event day) of the event. The following table lists the event date for each country - this date is between anticipation and adjustment.
Standard Vector Auto-regression (VAR) Model
Data Collection .1 Variables
- Dummy variable
This study will consider each country's time series data for three different events that are considered dummy variables (corporate income tax, VAT and COVID-19). The table shows that each country has a different time for the same event, and some countries, such as Kuwait and Qatar, did not apply VAT and Bahrain did not apply corporate tax.
Chapter Four- Results and Discussion 4.1 Preliminary Analysis
Plot
These graphs represent each country's variables; return index of daily return index of each country, stock market return and oil return. The graphs show that the stock market return for all GCC has higher volatility than the index return and the oil return. This graph is drawn by calculating the return of the index, exchange with EUR and oil for each country separately.
Descriptive Analysis
- Standard Deviation
- Skewness
- Jarque-Bera test
The summary of Saudi Arabia's descriptive statistics indicates that the average exchange rate return (the proxy of risk aversion) is -1.89E-05 percent, with a maximum return of 0.0459 percent and a minimum of -0.0481 percent. Saudi Arabia's variables are ranked by riskier variables, which have the highest standard deviation; oil return, index return and then stock market return. The rest of the tables represent the mean, median, maximum and minimum values of each variable for each country.
The following information is the ranking of the standard deviation from high risk to low risk. Standard Deviation Ranking of UAE and Oman; index return, stock return and then oil return. However, the standard deviations of Kuwait, Qatar and Bahrain are; oil return, index return and stock market return.
In terms of skewness, the analysis shows negative skewness for currency returns in Saudi Arabia, oil returns and index returns in Kuwait, and oil returns in Qatar, Oman and Bahrain. Also, the rest of the variables in each country, which are not mentioned in the negative tail, have positive skewness. Based on the Jarque-Bera test, which checks for normality, the results of this study indicate that the data are not normal (regarding the residuals).
The results of the Jarque-Bera test of all GCC variables show that the p-value is less than 0.05 for all variables considered for the sample, so the null hypothesis is rejected.
Correlation Analysis
Looking at the correlation of the variables for Saudi Arabia index returns have a negative correlation with currency returns and a positive correlation with oil returns. Although Kuwait has a negative correlation between exchange returns and oil returns, index returns correlate positively with oil returns and exchange returns. In addition, Qatar and Oman have a negative correlation between index return and stock market return, and oil returns have a positive correlation between index and stock market return.
Bahrain has a positive correlation between the index return and the stock market return, and the oil return has a negative correlation between the index and the stock market return. These correlations strongly support the use of variables because there is no multicollinearity between the variables.
Unit Root Test
According to the unit root test, all data variables for each country are stationary at one level. Based on the result, the null hypothesis is rejected, according to which those data series are stationary.
Cointegration Test
As determined by the Trace and Max-Eigen cointegration tests, three cointegrating equations have p-test values less than 0.05 for these data series.
Empirical result
- Event Study and Standard vector Auto-regression model
- Standard vector autoregression and VAR Granger Causality/Block Exogeneity Wald Tests
- Impulse Response
This can be interpreted as when a stroke is inserted from Index return; index returns will decline significantly. This can be interpreted as when a stroke is inserted by index return; exchange returns will remain stable. This can be interpreted as when a strike is entered by the exchange reversal; exchange returns will decrease significantly.
This can be interpreted as if the index return causes a shock; the return on the index will drop sharply by the tenth day. This can be interpreted as the shock causing the stock market return; replacement will return. This can be interpreted as if the shock is introduced by oil return; the exchange yield will remain stable.
This can be interpreted as when a shock is introduced by index returns; the oil yields will remain stable. This can be interpreted as when a shock is introduced through exchange yield; the oil return will remain stable. This can be interpreted as when a shock is introduced by index returns; the oil yields will become stable.
This can be interpreted as when a shock is introduced by Index Return; the index returns. This can be interpreted as when a shock is introduced through exchange yield; the index returns will remain stable.
Chapter Five- Conclusion
Main Findings and Conclusion
COVID-19 has a short-term impact on SA index returns and it has a short-term effect on exchange returns for SA, UAE, Kuwait, Qatar and Oman. Furthermore, VAT, corporation tax and COVID-19 have no influence on the long-term index return and currency return. We can conclude from these results that the impact of any new economic policy or pandemic will be more affected in the short term than the long term or may not have any significant effect on the financial market.
This model uses VAR to determine the impact of CT, VAT and COVID-19 on index return, stock market return and oil return and estimates their impact. Nevertheless, foreign exchange and oil returns are neither stationary nor significant when analyzed 65 65 with independent variables. In Kuwait, index and stock market returns are non-stationary and insignificant with independent variables.
Qatar, exchange rates and oil yields are neither stationary nor significant with any independent variables.
Limitations and Recommendations
The Time-Varying Impact of Monetary Policy Shocks on US Index Returns: The Role of Investor Sentiment. Contagion Effects of Corona Name during the COVID-19 Pandemic (March Contagion Effects of the COVID-19 Pandemic: Evidence from Gold and Cryptocurrencies. The Impact of Policy Announcements on Stock Market Volatility: Evidence from Currency Demonetization in India.
Retrieved August 25, 2017, from http://www.hiscoxlondonmarket.com: http://www.hiscoxlondonmarket.com/plunging-oil-price-challenges-insurers, February 4). Impact of the COVID-19 pandemic on the socio-economic, energy, environmental and transport sectors worldwide and Sustainable Development Goal (SDG). Real-time forecasts of the COVID-19 epidemic in China from February 5 to February 24, 2020.
The impact of oil prices on Islamic banking efficiency outcomes during the financial crisis: evidence from the MENA area. The COVID-19 pandemic, oil prices, the stock market, geopolitical risk, and the policy uncertainty nexus in the US economy: New evidence from a wavelet-based approach. Modeling the long-term impacts of the COVID-19 pandemic and oil price collapse on Gulf oil economies.
Intra- and inter-regional returns and volatility spillovers in emerging and developed markets: Evidence from stock indices and stock index futures. The Effects of a 'Black Swan' Event (COVID-19) on Herd Behavior in Cryptocurrency Markets: Evidence from the USD, EUR, JPY and KRW Cryptocurrency Markets (27 April 2020).
Appendix
Event Study (constant return model)
Vector Auto-regression Model
