The COVID-19 Outbreak and Risk–Return Spillovers between Main and SME Stock Markets in the MENA Region

This study investigates return and asymmetric volatility spillovers dynamic correlations between the main small medium-sized enterprise (SME) stock markets in Saudi Arabia Egypt for periods before during COVID-19 pandemic. Return are modelled using a VAR-asymmetric BEKK–GARCH (1,1) model, while DCC–GARCH model is employed to conditional these markets, which then used determine explore portfolio design hedging implications. The results show that bidirectional SME limited Arabia, shock have different characteristics dynamics both main–SME market pairs. In addition, mostly positive notably increased pandemic, particularly suggesting adding stocks enhances its risk-adjusted return, especially tranquil phases. One practical implication of our development can indirectly contribute economic via channel provide an avenue diversification risk management.