The paper aims empirically investigate the impact of government interventions during COVID-19 pandemic on stock returns in Bahrain. Using the Autoregressive Distributed Lag (ARDL) bounds test method in the analysis and daily data from 24 Feb 2020 till 12 Feb 2021, empirical results demonstrate that Bahrain stock market responded negatively to the growth in confirmed cases. The significant results indicate the strong reaction of stock markets towards the COVID-19. In addition, the direct impact of social distancing policies on stock market return appeared positive and significant suggesting that the social distance policies did not have a negative impact on the performance of Bahrain stock markets. Whereas, the interactive impact of government interventions on stock market return through the growth in confirmed cases was found positive but not significant. This outcome suggests that the adverse effect of growth in confirmed cases on stock market returns do not dampen with further stringent social distancing policies. Therefore, our findings imply that government interventions impact related to social distancing measures is not channeled through the dropping in confirmed cases. Our findings provide valuable insights and the guiding light to the governments and policymakers to devise their economic response to the pandemic and to manage the impact of COVID-19 disease on Bahrain stock markets.
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