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Performance of Saudi Stock Market Essay Example

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Performance of Saudi Stock Market

The major downside of the Saudi market is the restriction on investment avenues by foreign investors. Foreign investors can only participate in the market through mutual funds managed by Saudi banks (Marashdeh & Shrestha, 2010). In comparison with other markets in the GCC, a Saudi investment ceiling of 25% foreign investment is a barrier to growth of the market. Other researchers that have done much of work in the area of performance of the Saudi stock market, such as Fama (1991) and Al-Saleh and Al-Ajmi (2012), are in agreement that efficient allocation of ownership of the economy across various sectors is the prime objective of a capital market. This means that the Saudi economy, with all other external factors remaining constant, should grow at the rate of the stock market growth. This is not the case in Saudi Arabia as shown by the many stock market collapses while the economy was growing. In this paper the researcher will review the existing literature on the performance of the Saudi stock market, comparing and contrasting the performance of the market to other stock markets, finally drawing conclusions and recommendations on how to strengthen the market performance. Key factors that are affecting the performance of the market will also be covered in brief. Factors Affecting Performance of Saudi MarketOil Price ShocksThe market growth in capitalization, however, has been steady mostly due to the need to invest in the money being made from the oil industry. Oil prices and stock markets have been studied in depth by Rault and Arouri (2009). Rault and Arouri have established a linkage between performance of the stock market and oil price shocks. They cite that proper study of oil price shocks can help investors invest in the GCC countries including Saudi Arabia profitably. The Saudi stock market consists of diverse groups of companies focused on the strong domestic economy rather than the international prices of oil (Jadwa Investment, 2010).


Abdmoulah, W. (2010). Testing the evolving efficiency of Arab stock markets. International Review of Financial Analysis, 19, 25-34. Retrieved Novomber 14, 2012, from http://ipac.kacst.edu.sa/edoc/1431/190134_1.pdf.

Al-Saleh, N., & Al-Ajmi, J. (2012). Weak-form efficiency in the Saudi stock market. International Research Journal of Finance and Economics, (87), 192-211.

Alshogeathri, M. A. (2011). Macroeconomic determinants of the stock market movements: Empirical evidence from the Saudi stock market. Kansas State University. Kansas: Department of Economics, College of Art and Sciences. Retrieved November 14, 2012, from http://krex.k-state.edu/dspace/bitstream/handle/2097/11989/MoflehAlshogeathri2011.pdf?sequence=1.

Fama, E. F. (1991, December). Efficient capital markets: II. The Journal of Finance, 46(5), 1575-1617. Retrieved November 14, 2012, from http://www.jstor.org/stable/2328565.

Jadwa Investment. (2010). Oil and the Saudi stock market. Riyadh: Jadwa Investment.

Kim, J. H., & Shamsuddin, A. (2008). Are Asian stock markets efficient? Evidence from new multiple variance ratio tests. Journal of Empirical Finance, (15), 518-532.

Marashdeh, H. A., & Shrestha, M. B. (2010). Stock market integration in the GCC countries. International Research Journal of Finance and Economics, (37), 102-113.

Onour, I. A. (2009). Testing efficiency performance of Saudi stock market. JKAU: Economics and Administration, 23(2), 15-27.

Rault, C., & Arouri, M. E. (2009). On the influence of oil prices on stock markets: Evidence from panel analysis in GCC countries. THE UNIVERSITY OF MICHIGAN. Michigan: William Davidson Institute. Retrieved November 14, 2012, from http://wdi.umich.edu/files/publications/workingpapers/wp961.pdf.

Samba Financial Group. (2009). The Saudi stock market: Structural issues, recent performance and outlook. Riyadh, Saudi Arabi: Samba. Retrieved November 14, 2012, from http://www.samba.com/GblDocs/Saudi_Stock_Market_Eng.pdf.

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  • Pages: 5 (1250 words)
  • Document Type: Research Paper
  • Subject: Marketing
  • Level: Ph.D.
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