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Do Oil Prices influence Non-Oil Sector Stocks in Saudi Arabia? - Research Paper Example
Finance & Accounting
Pages 27 (6777 words)
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 type of diversification that they can go for while diversifying the stock portfolio. …
Oil is one of the most important economic resources in global economy today. Fluctuations and shocks in oil prices have been studied extensively by many leading economists. Several economic theories point to the impact of changes in oil price on other commodities as well as in the 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 and 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 the major driver of economic activity in Saudi Arabia. Oil related activities accounted for 47% of the GDP in 2010, and petroleum products exports amounted to $193 billion and accounted for 84% (by value) of total exports in Saudi Arabia. Therefore, oil prices play a vital 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. ...
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