The Amman Stock Exchange's Response to the 7 October 2023 Geopolitical Shock

This paper investigates whether the Amman Stock Exchange (ASE) responded to the geopolitical shock of the 7 October 2023 Hamas attack on Israel. Despite the MENA region's prolonged exposure to conflict, evidence on how its equity markets respond to geopolitical shocks remains limited, particularly for thinly traded markets such as Jordan's. Using an event study of 68 ASE-listed firms, with trade-to-trade returns and non-parametric tests adapted for thin trading, the study finds no abnormal reaction on the event day. A significant decline, at the 1% level across all three tests, emerges over the following one to two weeks, with cumulative abnormal returns of −2.49% over [0,+5] and −3.43% over [0,+10], before largely reversing by the sixth trading week (−0.72%), even as the market index continued to fall. The results point to a delayed and transitory reaction, consistent with slow price adjustment in a thin market and short-lived price pressure among smaller firms, although the market-wide nature of the shock limits the separation of firm-specific from market effects. The findings have implications for investors, risk managers and policymakers operating in MENA equity markets, and highlight investor behaviour in under-researched markets as a direction for future research. Contact : [email protected]