Impact of global events on UAE financial markets: an event study using STL decomposition

Purpose This paper examines how UAE firms respond to major crises. We focus on whether global and UAE-specific events elicit asymmetric market reactions and which firm characteristics drive any heterogeneity. Design/methodology/approach We assemble 61 potentially impactful events (global and UAE-specific) spanning crypto, economic, energy, environmental, geopolitical and health categories. Daily firm returns are decomposed via STL (Seasonal and Trend decomposition using Loess) to isolate the irregular component. We construct cumulative irregular returns (CIRs) in multiple event windows around each shock and assess significance using Welch confidence intervals. We examine heterogeneity by splitting firms at the median of size, leverage, liquidity, valuation and growth indicators. Robustness includes conventional cumulative abnormal returns, falsification tests with pseudo events and sensitivity to window lengths. Findings We document clear asymmetries: UAE-specific crises are associated with persistent negative CIRs, whereas global crises often result in positive CIRs for UAE firms. Smaller, low-debt value firms (low price-to-book) exhibit the most pronounced positive responses, especially during global economic and energy events, consistent with investor reallocation towards adaptable firms and perceived UAE stability. Research limitations/implications We retain clustered events to reflect the real sequence of shocks; overlapping windows may contaminate attribution. STL choices and market-model alternatives are examined in robustness, but residual model risk remains. The results demonstrate the mechanisms of crisis transmission in an emerging market with evolving depth and liquidity. Practical implications For portfolio construction during crises, investors should look to smaller, low-debt value firms in the UAE to improve performance when global shocks dominate. Policymakers may target support to highly leveraged and high-valuation firms that are more vulnerable to local shocks. Originality/value We deploy STL to extract event-driven irregular returns at the firm level, reducing dependence on restrictive return-generating models. To the best of our knowledge, this paper is the first to provide UAE-wide firm-level evidence on asymmetric crisis effects across a comprehensive event set, revealing heterogeneity by balance sheet strength and valuation.