Influence of Oil Price on Non-Oil Sector Stocks in Saudi Arabia - Research Paper Example

? Influence of Oil Price on Non-Oil Sector Stocks in Saudi Arabia Department, Your University Name Correspondence for this paper should be addressed to Your Name here followed by Your Mailing Address here Contact: Your email ID here Table of Contents Influence of Oil Price on Non-Oil Sector Stocks in Saudi Arabia Your Name Your University 1 Author Note 1 Your Name, Your University Department, Your University Name 1 Correspondence for this paper should be addressed to Your Name here followed by Your Mailing Address here Contact: Your email ID here 1 Table of Contents 2 I. Introduction 3 II. Literature Review 4 III. Motivation 10 IV. Problem Description 11 V. Formulation of Hypothesis 12 VI. Research Methodology 15 VII. Clarification of concepts and terms 18 VIII. Research Framework 20 IX. Sources 22 X. Qualification and experience 24 XI. Appendix: Tadawul stocks and sectors distribution 25 XII. Appendix: Stocks to be used for Analysis 26 I. Introduction Oil is one of the most important economic resources in world’s economy today. Fluctuations and shocks in oil prices have been studied intensively by many leading economists and several theories in economics point to the impact of oil price changes in world economies. The context of oil is even more important in the Saudi Arabian economy as it is has one of the biggest reserves of oil (one-fifth of world’s total) and is the second largest producer (behind Russia) of oil in the world. Saudi Arabia has proven oil reserves of 264.52 billion barrels of oil (OPEC, 2011) and was only recently surpassed by Venezuela who claimed their oil reserves had risen to 269.5 billion barrels of oil. In terms of oil production, Saudi Arabia has a quota allocation of just over 30% of production among Organisation of the Petroleum Exporting Countries (OPEC) countries. The Saudi Arabian oil production in 2010 was 9.1 million barrels per day which accounted for 13% of world’s total oil production. Oil is also a major driver of economic activity in Saudi Arabia. Oil related activities accounted for 47% of the GDP in 2010 (MoF, 2011), and petroleum products exports amounted to $193 billion and accounted for 84% (by value) of total exports in Saudi Arabia (OPEC, 2011). Therefore, oil prices play an important role in the Saudi Arabian economy. However, from the perspective of an investor or an enterprise in Saudi Arabian market, it is also important to know whether oil prices have a major role to play in stock prices of non-oil sector companies too. If there is a high positive correlation between oil prices and non-oil sector stocks, an investor can used these stocks a hedge on their investments in oil. The outcome of this study could therefore be very useful for investors and enterprises already present or planning to enter the Saudi Arabian market. II. Literature Review Stock markets are largely dependent on economic activity in the country. In Saudi Arabia, as oil is a major component of the economy, stocks in Saudi Arabia are expected to indirectly depend largely on oil price movements. The influence of oil is however not limited to Saudi Arabia or other OPEC countries alone. Oil supply and price shocks have been a field of study for many economists globally. Therefore, a lot of research has been previously done on understanding the effect of oil prices on stocks. Where some studies have focussed on impact of oil price shocks on the stock market others have focussed on the general impact of oil prices on stocks. Most of these studies are focussed on the US market and there are only a few studies look into this aspect in Saudi Arabia. Because detailed study of oil shocks is out of scope of the current research, the literature review will focus only on studies that have been done on regular influence of oil prices on stock markets. Several studies have been done to understand the impact of oil prices on stock markets. Some of the notable ones among these are Sauter & Awerbuch (2003), Sari and Soytas (2006), Pescatowri & Mowry (2008), Abdelaziz, Chortareas & Cipollini (2008), Bjornland (2008), Rault & El Hedi Arouri (2009), El Hedi Arouri & Julien (2009), Rault & El Hedi Arouri (2010), Nandha & Singh (2011), Shigeki (2011), Abdulkarim, Gamble & Bourland (2011). Sauter and Awerbuch (2003) conducted their research of assimilating the findings of all major papers before 2002 on relationship of oil prices with economic activity and stock prices. They found that most research seems to suggest an inverse relationship between oil prices and economic activity, hence stock prices. However, they also noted that oil price volatility and not just oil prices had a large role to play on stock returns. They concluded that high oil prices, high volatility in oil prices, and oil price shocks lead to reduced economic activity and lower stock returns. Sari and Soytas (2006) however found that in Turkey, oil price shocks had no significant impact on real stock market returns. They reached this conclusion by studying the variance in oil prices and stock prices in Turkey from 1987 to 2004. They also noted that this discrepancy in result may be because the Turkish government levies high excise tax on oil and that changes in oil prices are somewhat absorbed by changes in tax rates on oil thereby essentially saving the Turkish market from direct impact of oil prices. On this basis, in Saudi Arabia, since the taxes on oil are low and the governments maintains a comparatively very low price of petroleum products (TheAtlantic, 2011), there is little expected change in economic activity based on change in oil prices. However, from enterprises’ point of view, as a large part of Saudi Arabian economy is controlled by exports, especially oil exports; the effect on oil price makes an indirect impact on businesses in Saudi Arabia. Pescatowri and Mowry (2008) conducted a study on the influence of oil prices on various US stock market indices with data from 1997-1998 and from 2007-2008. They found that the coefficient of correlation between oil prices and stock indices had increased from 1997-98 to 2007-08 implying that as the dependence of the economy had increased on oil, it had an increased role to play on the stock market too. However, they also found that the while the correlation had increased over time, there was still not a significant correlation between oil prices and stock market index movements. For the duration of 2007-08, they found a correlation of -0.095 for S&P 500, -0.244 for S&P financial index, -0.132 for Nasdaq, -0.003 for NYSE Composite, -0.140 for Dow Jones 30 Industrial Average, and for Dow Jones transportation index the correlation was -0.21. These extremely low values of correlation suggest that there is only a small influence of oil prices on stock prices. The implication of this finding for the research on Saudi Arabian market is that as the dependence of the Saudi Arabian economy on oil is much higher than in the US, contrary to the finding of this report for US, a higher correlation is expected between oil prices and stocks in Saudi Arabia. In their research on link between oil prices, exchange rates, and stock prices, Abdelaziz, Chortareas & Cipollini (2008) found that oil prices are a significant contributor to stock price movements in Gulf Cooperation Council (GCC) countries. They observed that oil prices act as conduits for real exchange rates and hence influence domestic stock prices considerably. For Saudi Arabia and also for other GCC countries, they found that oil prices and domestic stock markets are positively related. This is explained by the fact that as oil prices increase, the trade balance of these countries improves and the personal disposable income also increases in these countries. This generates higher domestic demand leading to an increase in stock prices. A similar conclusion is drawn for Norway in a study conducted by Bjornland (2008) for data from 1993 to 2005. Norway is also an oil exporting country and the study finds that a 10% increase in oil prices leads to a 2.5% increase in stock returns where after the effect of further increase in oil price eventually dies out. The author puts forward a similar explanation for this observation by stating that higher oil prices increase net aggregate wealth and demand in the domestic economy thereby contributing to higher stock prices. In the model used for the research, several macroeconomic indicators were also included in the study and it was found that indicators other than oil had a relatively small role on stock prices. According to this study then, we could expect to see a similar result for Saudi Arabia. Rault & El Hedi Arouri (2009) researched the data from 1996 to 2007 and studied the long-run relationship between oil prices and stock prices for GCC countries and found that while for most GCC countries oil price increases had a positive impact on stocks markets, for Saudi Arabia it was negative. They explain that this observation is due to the fact that Saudi Arabian market is much more dependent on oil than other GCC countries, that the Saudi Arabian market suffers from import inflation, and that a majority of companies listed on the Saudi Arabian stock market are owned by the government and most stocks of these companies are held by strategic investors due to which these stocks have very low volumes of trade. This low volume of stock trade decreases the efficiency of normal market operations of arbitrage and speculation leading to non-positive impact of oil price increase on stock returns. El Hedi Arouri & Julien (2009) studied the short-term relationship between oil prices and stock markets in the GCC countries from 2005 to 2008 and found that while in Qatar, Oman, and UAE oil prices had a strong positive relationship with stock prices, in Saudi Arabia, Bahrain and Kuwait oil prices do not affect the stock market. The studied the interaction between oil prices and stock market returns for both linear as well as nonlinear relationship and found the same result for both techniques. Rault & El Hedi Arouri (2010) conducted Granger-Causality tests on oil prices and stock prices for GCC countries to ascertain whether there is any causality between the two variables. They found that while for Saudi Arabia, the relationship between stock prices and oil prices is bi-directional (both variables show causality for the other), for other GCC countries oil prices have significant Granger-Causality on stock prices. They concluded that while stock market investors in other GCC countries should look at oil prices to predict stock prices, investors in oil markets should look at changes in stock prices in Saudi Arabia. They explained this observation of bi-directional causality in Saudi Arabia by the fact that while oil prices had influence over stock prices, political and economic shocks in Saudi Arabia also had considerable influence on oil prices. Nandha & Singh (2011) studied the oil price sensitivity of 29 Chinese stocks from different sectors to oil prices using data from 1994 to 2009. They found that stocks from all the sectors showed a significant positive sensitivity to oil price. The research was conducted using a regression analysis. The implication of this research for the proposed study is that all sectors in the proposed research could be expected to show a similar directional relationship to oil prices. Shigeki (2011) conducted a similar research for Brazil, Russia, India, and China (BRIC) markets and found that while for these countries oil price had a significant positive relationship with stock prices except for Brazil. For Russia, the largest oil exporter in the world, the contribution of oil price shocks to volatility in real stock returns was relatively large and statistically significant. Abdulkarim, Gamble & Bourland (2011) conducted a research on several companies from different sectors in the Saudi Arabian stock market for their correlation with oil prices. Using the data from 2008 to April 2011, they note that the correlation coefficient of oil prices with the Tadawul All Share Index (TASI) is 0.68, which they claim to be too low given the dependence of the Saudi Arabian economy on oil. They found that Petrochemicals (0.89) and Industrial investment (0.85) sectors had the highest correlation with oil prices. For Banks (0.27), Insurance (-0.18), Telecommunication and Information services (0.13), Media and publishing (-0.68), and Building and construction (-0.51) sectors the correlation coefficient was relatively low. The authors researched various stocks from different sectors individually and reached this conclusion for each sector. Summary of Literature review Various researches have been conducted to study the influence of oil prices on the economy and the stock prices. A lot of studies have focused on oil price shocks and on the US market. There are only a handful of researches on the Saudi Arabian market, and among these few researches, the researchers have found varying results of the influence of oil prices on stock prices – while some studies suggest no relation between oil prices and stock prices, others seem to suggest a positive relationship in Saudi Arabia. Further, there are no researches that look that this relationship by sector in detail (other than some done using correlation analysis only). It is natural that oil prices would influence stocks of companies heavily dependent on oil, but the relationship with non-oil sector companies is not very clear. A clear understanding of influence of oil prices on behaviour of sector wise stocks could be of importance for investors looking to hedge their investments in oil markets. Also enterprises in Saudi Arabia could benefit from this research in knowing how their stocks are likely to behave according to changes in oil prices. Thus, one of the areas of potential research could be whether oil prices significantly influence the stock prices of companies operating in the non-oil sector. III. Motivation Directly or indirectly, oil has a role to play in each and every aspect of today’s modern economy. It is therefore important to see how it affects stock prices too. As an investor, this subject of research is important to me as it would help me understand the dynamics of stock markets and how it moves in relation to oil prices. An understanding of the level of influence of oil prices on stocks would also help me better analyse my options for hedging my investments in oil derivatives. Also, as I plan to work in an investment firm as an analyst for stocks, this research would add weight to my candidature when I apply to these firms. IV. Problem Description The current literature review shows that there is no existing research on whether (or not) non-oil sector stocks in Saudi Arabia are influenced by oil prices. There has been one research (Abdulkarim, Gamble & Bourland, 2011) in this direction but it has only focused at correlations between oil prices and stock prices. While this research answers whether the stock and oil prices move together, it does not necessarily indicate whether oil prices indeed influence the stock prices. Thus the research will try to answer the following question: Is there a significant influence of oil prices on non-oil sector stock prices in Saudi Arabia? This research would help to better determine the role oil prices play in the Saudi Arabian stock market. The results of this research could be significant for investors and enterprises in determining their hedge on their oil investments, and in determining the direction their stock portfolio is expected to go in depending on oil prices. Finally, the result of this research could serve as a basis for further research and verifying its validity in other major oil producing countries. V. Formulation of Hypothesis In order to objectively answer the research questions raised above, the research will start out with the following hypothesis and the study will focus on proving (or disproving) the hypothesis: Hypothesis 1 Oil prices cause no significant influence of on non-oil sector stocks The reason for this hypothesis is a deductive one. This hypothesis is based on the fact that although the oil prices influence businesses in most sectors they also increase t he domestic aggregate wealth and disposable income of people in Saudi Arabia. For example, in the context of retail sector, an increase in price of oil leads to an increase in transportation cost of goods thereby increasing the cost for retailers. At the same time, the purchasing power of people also increases thereby increasing demand and negating the effect of higher cost. So, retailers see no major disturbance in their business in case oil prices increase. Similarly, in banking and financial services sector, an increase in oil price may reduce the demand for cars thereby reducing auto loans business for banks and lending institutions, but as domestic demand for other goods and services increases due to increased purchasing power, banks are able to lend on other consumer purchases. Thus, a loss or downside on one side of the business gets made up by higher overall demand generated due to increased income. The research will include a study of 30 stocks from non-oil sectors in Saudi Arabia to analyse whether movements in oil prices in the global commodity markets cause these stocks to move relatively. This relative movement would be studied by using Granger-Causality test analysis for individual stocks against oil prices. The result of these analyses will be used to determine whether (and which categories of) non-oil sector stocks are (or are not) influenced by oil price movements. The 30 stocks will be from different non-oil sectors based on their market capitalisation. These non-oil sectors are the following 10 sectors: 1) Agriculture and Food Industries 2) Banks & Financial services 3) Building and construction 4) Cement 5) Hotel and Tourism 6) Insurance 7) Media and publishing 8) Real Estate Development 9) Retail 10) Telecommunication and Information services These sectors have been chosen for research as these sectors are not linked directly to any upstream or downstream activities in the oil industry. Secondly, these sectors are clearly defined by the Saudi Arabian Stock Exchange (Tadawul, 2011) and stocks are segregated into these sectors by the Tadawul. The choice of stocks will be made from stocks appearing under this classification in the Tadawul. The appendix shows the details of market capitalisation and the number of stocks in each of these sectors. The choice of stocks within each sector is made based on the market cap of stocks. The 30 stocks that will be analysed are the top stocks in each sector as shown in the appendix. As there are 10 sectors, the number of stocks from each sector has been kept to 3 except in case of Hotel and Tourism, and Bank sectors. There are only two stocks in Hotel and Tourism sector, so 4 stocks from Banking sector have been chosen instead of three. These 30 stocks combined represent nearly 71% of the market capitalisation in non-oil sector stocks in the Saudi Arabian Stock Exchange. Underlying Assumptions and possible limitations of the study The key assumptions in the study are: 1) The stocks chosen for analysis are representative of the sectors as they account for most market capitalisation in each sector 2) By studying the Granger-Causality between oil prices and stock prices, we can reliably conclude on the influence of oil prices on stocks. 3) The impact of oil prices on stock prices is a constant phenomenon and not a “one-time” effect or a switch-on/switch off effect. 4) Past data on oil prices and stock prices can be found through reliable sources Some limitations of the study are: 1) Stock prices are affected not just by oil prices; thus a model of economic indicators alone for stock price movements may not be sufficient and/or accurate. A single multi-step regression of economic indicators will be used in the research to create a model for stock prices for large and small caps - some economic indicators may be eliminated from the model. Some of these eliminations may not be correct if a study were to consider a complete set of parameters affecting stock prices 2) There are not too many stocks per sector listed on the Saudi Arabian stock market. For example, for media and publishing sector, there are only 4 stocks listed on the Tadawul. Therefore, the results from this study may not be statistically significant to be applicable to all future stocks listed under this sector. 3) The scope of the proposed research is the Saudi Arabian market and the outcome can be applied only for this market and cannot be generalised for all economies. VI. Research Methodology The research will focus on proving or disproving the hypothesis proposed above. This would be done by gathering empirical evidence from the data collected and analysed for the proposed stocks and oil. The research will therefore be a Quantitative research using data available from reliable and official sources. Quantitative research is defined as a research that tries to explain a phenomenon by mathematically analysing numerical data. The data needed for this research is accessible through official Saudi Arabian Stock Exchange (Tadawul) and through other reliable sources like Yahoo Finance and Bloomberg. Since this data is publically available and accessible, there is no need for a questionnaire or for interviewing people related to this topic. Scope of research The research will focus on the Saudi Arabian market. Stocks listed on the Tadawul from 4 the different sectors outlined in the “Formulation of hypothesis” section of this proposal will be identified and data for these stocks will be analysed. The main reason for choosing these sectors is that these sectors are ‘a priori’ not directly related to toil industry. Also, these sectors are clearly marked by the Tadawul and there will be no conflict of whether one stock belongs to a particular sector or another. Further, because the data for all these stocks will come from Tadawul, any error in stock prices will be reflected equally for all stocks therefore we will be able to eliminate chance of different scope/time of capturing the stock prices. Methodology: obtaining the data All the data about stock prices needed for the research will be obtained from the official website of the Saudi Arabian Stock Exchange (Tadawul). For oil prices, closing spot prices of oil will be obtained from Bloomberg and Yahoo! Finance. Methodology: Data analysis The data obtained for stock prices and oil prices will be analysed for correlation using graphical method and using statistical tests. This analysis will be done separately for each stock. Next, Granger-Causality test will be used to determine whether oil price movements cause changes in these stock prices. Based on the results for each stock, the data will then be compiled by sector of operation of each company to see what final conclusions can be drawn about a particular sector and how it is influenced by oil prices. This will help us get a decision on the research hypothesis and answer the question of whether non-oil sectors stocks are influenced by oil prices. The choice of Granger-Causality test as against a simple statistical correlation is based on the fact that studying correlation alone will not tell us whether oil prices influence stock prices. Correlation means that both variables move together; however, this movement together could be based on change in a third variable and not necessarily caused by movement in one variable. The Granger-Causality test helps to determine the causality – that is whether change in one variable causes change in another. Hence, the Granger-Causality test has been chosen for study in this research. Other possible methodologies but discounted for research Some other techniques that could be used in this analysis but which have not been used include: 1) We could take sector based indices and analyse their correlation with oil prices. However, these indices would have different weights of stocks. Due to this, if one stock is highly dependent on oil price and if it is the biggest component in the index, we could infer that result for the entire sector. By analysing individual stocks, we are more “safe” in drawing conclusions about sectors. 2) A qualitative research could be done by designing a questionnaire and interviewing the traders to get their inputs on how oil price fluctuations affect the stock prices. This method would however be very subjective and the results may not be strongly applicable for all traders/investors as every investor has his/her own mindset. 3) Another approach could be to do a regression analysis of stock prices with oil prices as one of the factors to see the weight of oil prices in influencing the stock prices. However, as stock prices are affected by numerous factors, and we may not be able to get reliable data for all factors - we may miss some important factors and get a result which may not reflect the reality. VII. Clarification of concepts and terms Glossary of terms and concepts Aggregate demand: The total demand for goods and services in an economy for a specified time period and at specific price levels is called aggregate demand. It is made up of 4 major components – consumption or consumer spending, investment, government spending and net exports. Correlation: A statistical measure that describes how two variables move relative to each other. The coefficient of correlation has value between -1 and 1. A positive value means the two variables move in the same direction simultaneously. The closer the value is to 0, the lesser relative movement they have. Disposable income: The amount of money that the households in an economy have for spending and saving after taxes have been deducted from their total income. It indirectly measures the potential for consumer spending in the economy. Downstream (oil industry): The downstream activities in oil industry refers to refining and distribution of natural gas and products refined from crude oil Exchange rates: The rate at which two currencies can be exchanged for each other. Essentially, it is the price at which one country’s currency can be exchanged for another country’s currency. Granger-Causality test: A statistical test used to measure whether change in one variable causes a change in another variable. For testing Granger-Causality among two variables, the methodology employed is to test the causality of each variable for the other and establish which variable causes change in which variable. The key principle used is that the independent variable is better able to predict the dependent variable than when taking only the lagged values of the dependent variable to predict it. Hedging: A risk management strategy used to limit or offset probable loss from fluctuations in an investment. For a risky investment made in an instrument, hedging is the strategy to invest in another investment that is expected to provide a positive return when the main investment starts to yield a negative return. Market capitalisation: Market cap refers to the value of all outstanding stocks of a company. It is calculated by multiplying the number of outstanding shares and the value of each share in the stock market where the shares of the company are traded. Non-Oil sectors: The sectors that are not directly related to the oil industry. These sectors have no direct relationship in the core business to either upstream or downstream activities in the petroleum industry. Regression analysis: A statistical technique for establishing relationship between two or more variables of which one is a dependent variable, whose value depends on the other variables, and the others are independent variables whose values are not affected either by the dependent variable or by other independent variables. Stock return: The return on investment earned by investing in a given stock Trade volume: The number of general outstanding shares of a stock that are traded on the stock exchange. Upstream (oil industry): This refers to the exploration, recovery, and production of oil and natural gas. VIII. Research Framework The final research report will be formatted in standard APA style for both writing of the report and for citation of the sources used. The research report would include a title page and 8 major sections. The title page would include the title of the research, the name of the guide, university name, month, year of completion of the research, and my name. Other than these, the report would also include a table of contents and list of figures and tables in the report. These would be included after the title page and the first two sections (Abstract, and Acknowledgments). A brief description of the 8 sections in the proposed research report is given below: A. Abstract: In this section, a summary of the report would be made within one page. B. Acknowledgements: In this section, I would acknowledge and thank all those who would have helped me in completion of the report - my research guide, other students, and other external organisations which help me access the data necessary for the analysis. C. Introduction: This section would provide a background and context for the research done. It would also briefly describe the scope and objectives of the report, the achievements of research, and an overview of the entire research briefly explaining the contents in other sections. D. Literature review: In this section, an understanding of the existing work in this field would be described. E. Research and Finding: The research methodology, method of data collection, detailed analysis of the results and how they were obtained will be included in this section. F. Conclusion: This section would summarise what the research has achieved. Starting with a discussion of the statistical results, this section will then evaluate the research compared to existing work and also set direction for future work in this field. G. References: APA style referencing and citation of all the sources used for completion of the research will be included in this section. H. Appendix: This section will include any relevant information/statistical output that were not included in the previous sections. IX. Sources Abdelaziz, M., Chortareas, G., & Cipollini, A. (2008). Stock Prices, Exchange Rates, and Oil: Evidence from Middle East Oil-Exporting Countries. Abdulkarim, G., Gamble, P., & Bourland, B. (2011). Oil and the Saudi stock market. Riyadh: Jadwa Investment. Bjornland, H. C. (2008). Oil Price Shocks and Stock Market Booms in an Oil Exporting Country. Norway: Norwegian School of Management. El hedi Arouri, M., & Fouqau, J. (2009). On the shortterm influence of oil price changes on stock markets in GCC countries: linear and nonlinear analyses. El Hedi Arouri, M., & Rault, C. (2010). Oil Prices and Stock Markets: What Drives what in the Gulf Corporation Council Countries? CESIFO WORKING PAPER NO. 2934. Maghyereh, A., & Al-Kandari, A. (2007 Vol 33). Oil prices and stock markets in GCC countries: new evidence from nonlinear cointegration analysis. Managerial Finance , pp. 449-60. MoF. (2011). Statistical Tables - Constant price GDP by economic activity and sector. Retrieved September 23, 2011, from Kingdom of Saud iArabia - Ministry of Finance: http://old.mof.gov.sa/en/docs/stats/index.htm Nandha, M., & Singh, H. (2011). Short-run and long-run oil price sensitivity of Chinese stocks. Australia. OPEC. (2011). OPEC Annual Statistical Bulletin. Austria: Ueberreuter Print und Digimedia. Pescatori, A., & Mowry, B. (2008). Do Oil Prices Directly Affect the Stock Market? Retrieved September 23, 2011, from Federal reserve Bank of Cleveland: http://www.clevelandfed.org/research/trends/2008/0908/04ecoact.cfm Rault, C., & El Hedi Arouri, M. (2009). On the influence of oil prices on stock markets: Evidence from panel analysis in GCC countries. Michigan: William Davidson Institute. Sari, R., & Soytas, U. (July 2006). The Relationship between Stock Returns, Crude Oil Prices, Interest Rates, and Output: Evidence from a Developing Economy. The Empirical Economics Letters, 5(4) . Sauter, R., & Awerbuch, S. (2003). Oil price volatility and economic activity. Paris: IEA. Shigeki, O. (2011). Oil Price Shocks and Stock Markets in BRICs. The European Journal of Comparative Economics, 8(1) , 29-45. Tadawul. (2011). Company List (All Market). Retrieved September 25, 2011, from Saudi Stock Exchange: http://www.tadawul.com.sa TheAtlantic. (2011). Gas Prices Around the World: Cheaper Than Water and $10 a Gallon. Retrieved September 27, 2011, from The Atlantic.com: http://www.theatlantic.com/business/archive/2011/05/gas-prices-around-the-world-cheaper-than-water-i-and-i-10-a-gallon/238226/#slide20 X. Qualification and experience I am currently pursuing Bachelor of Science in Finance from Mohammad Bin Fahad University in Al Khobar with a current GPA of 3.77/4. I am also a recipient of a scholarship from the Saudi Ministry of Higher Education for excellence in academics. During my studies, I have successfully completed several courses in finance which have given me a good understanding of financial analysis, and of how stock markets work – all of which is essential in completing this research. Besides, my problem solving and critical thinking skills which I have developed over the years through these courses will help me to objectively analyse the data, and to rightly conduct and interpret the results of statistical tests needed for this research. My knowledge of Microsoft office and my good communication skills will help me write the research report with finesse and ease. XI. Appendix: Tadawul stocks and sectors distribution Sectors defined by Tadawul Number of stocks Market Cap (%) Petrochemical Industries 14 37.7 Banks & Financial Services 11 24.9 Telecom 5 9.5 Energy & Utilities 2 4.7 Cement 9 4.3 Agriculture & Food Industries 15 3.8 Industrial Investment 13 3.3 Real Estate Development 8 3.1 Multi-Investment 7 2.7 Insurance 31 1.9 Building & Construction 15 1.8 Retail 9 1.5 Transport 4 0.5 Media and Publishing 3 0.3 Hotel & Tourism 2 0.2 Total Tadawul 148 100 Source: Tadawul, 2011 XII. Appendix: Stocks to be used for Analysis Industry Sector Top Stocks in each sector by Market Cap Agriculture & Food Industries Almarai SAVOLA Group Herfy Foods Banks & Financial Services Al Rajhi SAMBA RIBL SABB Building & Construction Ceramic ALKHODARI MMG Cement Southern Cement Saudi Cement Yamamah Cement Hotel & Tourism Hotels Shams Insurance Tawuniya MEDGULF AMANA Insurance Media and Publishing SRMG Tihama SPPC Real Estate Development Jabal Omar Dar Al Arkan Emaar E ,C Retail Jarir AlHokair A,Othaim Market Telecom STC Etihad Etisalat ZAIN KSA Source: Tadawul, 2011 Read More