Impact of TASI Index Fluctuations on Investor Decisions in the Saudi Market Amid Current Political Developments: An Analytical Study

Abstract

The purpose of this study is to examine how regional and international political events influence the movements of the TASI Index, with a focus on the behavior of investors in the Saudi stock market during recent developments. The study aims to reveal the extent to which political instability outside Saudi Arabia contributes to market volatility and affects investor risk appetite and strategy. The research employs a quantitative, analytical approach, utilizing time series data from January 2023 to January 2025. The study uses the Augmented Dickey-Fuller test to examine data stationarity. It utilizes Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Exponential GARCH (EGARCH) models to explore volatility and asymmetric effects resulting from political circumstances. The analysis reveals that the period from 2023 to 2025 is characterized by heightened volatility in the TASI index, which closely correlates with episodes of regional political instability. Results from GARCH and EGARCH models indicate that political events drive both risk aversion and changes in investor behavior, often leading to more conservative investment decisions, such as a preference for low-risk assets amid uncertainty. The study is limited by the availability of recent data and focuses on a specific timeframe, which may not accurately reflect long-term dynamics. There is a need for adaptable frameworks to address emerging risks as the market continues to evolve. This research provides a novel perspective by integrating political risk with behavioral finance and volatility modeling in the context of the Saudi market. The results offer policymakers, investors, and market participants practical insights for developing strategies to manage risk and enhance market stability during periods of political uncertainty.