Investor Behavior and Stock Market Dynamics in Palestine During the COVID-19 Crisis

This study investigates the impact of the COVID-19 pandemic on the stock returns of 46 companies listed on the Palestine Exchange from June 10, 2020, to December 31, 2021. By employing a panel data regression model, this research examines the impact of daily confirmed COVID-19 cases and death toll on the daily stock returns, drawing on behavioral finance principles and the efficient market hypothesis. Contrary to conventional expectations, daily COVID-19 death counts significantly and positively affect stock returns. Daily cases show a sector-specific effect that positively impacts banking and industrial sector stock returns, while the finance, insurance, and services sectors are unaffected. A negative correlation exists between the number of deaths and stock returns, signaling this as a more critical metric affecting stock performance on the Palestine Exchange. The results suggest that prompt and effective government interventions during health crises can bolster investor confidence and stabilize stock markets. Sector-specific policies may be essential to protect the most vulnerable sectors and instigate recovery. Investors and company managers can use the study findings to inform risk management and strategic decision-making processes.