Economic and Geopolitical Shocks and Their Influence on the Saudi Stock Market, Saudi Aramco, and Bitcoin: Evidence from ARDL and VAR Models

This study examines the dynamic relationships between the Tadawul All Share Index (TASI) returns, Saudi Aramco stock returns, and Bitcoin (BTC/SAR) returns from January 2, 2019, to December 31, 2023. Using the Autoregressive Distributed Lag (ARDL) model, Vector Autoregressive (VAR) models, impulse response functions, and Granger causality tests, the research explores how these relationships evolved across distinct macroeconomic periods, particularly during and after the COVID-19 pandemic and the Russo-Ukrainian war. The ARDL model results indicate stable long-run relationships between TASI and Saudi Aramco returns across all periods. However, these relationships weakened post-COVID-19, likely due to the pandemic’s structural impact. Short-run dynamics exhibited higher volatility during crises, with external shocks playing a significant role. The bounds test confirmed a long-term relationship pre-COVID-19, which weakened post-pandemic. The VAR model highlights strong interlinkages, especially pre-crisis, with TADAWUL returns leading Saudi Aramco returns. This relationship weakened in the post-COVID-19 and post-war periods, indicating global market disruptions. Granger causality tests revealed that causal dynamics are period-specific, with stronger causality observed before the crises. Impulse response functions show that TADAWUL shocks have a more substantial impact on Saudi Aramco than on Bitcoin returns. These findings provide valuable insights for market participants navigating an uncertain economic landscape.