Abstract
In this study, the response to the COVID-19 global pandemic by the Saudi financial market is discussed. Using panel data and pooled Ordinary Least Squares (OLS), it is seen that the increase in COVID-19 verified cases has led to adverse reactions by the stock market. This can be determined through related stock market returns data from March 3rd, 2020 to December 9th, 2020, which shows that, during this period, stock market returns declined as numbers of registered cases grew. In addition, further observation reveals that stock markets took a more dynamic stance towards the rise in confirmed non-fatal cases as opposed to that of virus-related fatalities. Furthermore, it is noticed that when the degree of restriction of lockdown increases, the impact of Brent crude oil price return on Saudi stock market return decreases. Thus, the suggestion is that investors should not use Brent oil return as an indicator of Saudi stock return during a complete lockdown. Moreover, the rise of lockdown restrictions and the number of confirmed cases leads to more fluctuation in the Saudi stock market return. Overall, our findings indicate that financial markets are swiftly reacting to this destructive virus but this response differs according to different outbreak stages.