The research will also investigate the role of the country’s oil dependence on the stock market in Saudi Arabia too as it has been previously confirmed by research. Besides, the research is also going to confirm whether the dependence of the Saudi Arabian economy on oil is much higher than in the US, as it has been established before that contrary to the finding of this report for US, a higher correlation is always expected between oil prices and stocks in Saudi Arabia. This report includes 8 main sections including the Introduction, Literature review, Research methodology, Findings and Conclusions. The introduction provides a background and context for the research done, as well as describing the scope and objectives of the report, the achievements of previous studies and an overview of the entire research briefly explaining the contents in other sections. In the Literature review the existing studies in this field are discussed. The research methodology and findings section describe the method of data collection, as well as a detailed analysis of the results and how they were obtained. The Conclusion summarises the issues discussed in the research, as well as the achievements. This paper also discusses the statistical data collected and evaluates the research compared to existing work and set the direction for future work in this field. I. Introduction Oil is one of the most important economic resources in world’s economy today. The context of oil has been found to be 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. The government of Saudi Arabia has been encouraging private sector participation and growth in an effort to reduce the kingdom's over-dependence on oil, while increasing opportunities for employment within the citizenry. This research will aim to investigate whether high oil prices, high volatility in oil prices, and oil price shocks lead to reduced economic activity and lower stock returns in Saudi Arabia as it has been confirmed previously. There is a limited amount of existing research on the influence of oil prices on non-oil sector stocks in Saudi Arabia. The available research does not indicate whether oil prices indeed influences the stock prices or not. 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 will be investigated to determine whether it makes an indirect impact on businesses in Saudi Arabia. Many leading economists and several theories in economics point to the impact of oil price changes in world economies have studied fluctuations and shocks in oil prices intensively. 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
Running head: INFLUENCE OF OIL PRICES ON NON-OIL SECTOR STOCKS. AN ANALYSIS OF THE INFLUENCE OF OIL PRICES ON NON-OIL SECTOR STOCKS IN SAUDI ARABIA Name University Table of Contents Table of Contents 2 Abstract 3 I. Introduction 4 II. Formulation of Hypothesis 8 III…
This research helps 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 could serve as a basis for further research and verifying its validity in other major oil producing countries, and in determining the direction their stock portfolio is expected to go in depending on oil prices.
Many researchers have studied the impact of changes in oil prices on other stocks in order to provide investors an idea of where to invest and avail the maximum returns. Sauter and Awerbuch assimilated the findings of all major papers before 2002 on the relationship of oil prices with economic activity and stock prices.
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 causality relationship 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.
Therefore, for developing comprehensive study on Saudi Stock Market various aspects have been explored with evaluation of events in the market relative to events in world. Upon analysis, it was explored that world oil prices have direct impact on the TASI while internal country strength resists the impact of Asian crises on market.
Saudi Aramco through its management of 98% of the countries oil resources (Jaffe and Elass 2007) has had a significant impact on the Saudi Arabian Society. Saudi Aramco has had a history of improving the lives of Saudis whose livelihood in the past were dependent mainly on agriculture, making oil a very important commodity in the Saudi Arabian economy.
In such an environment, being complacent or relying on one decisive strategy can lead to failure for even well established and strategically sound organizations. SKA-ARABIA Oil Company has carved out a place for itself in the world’s fuel, aviation and logistics market by providing crucial services in unstable and often dangerous environments of Iraq and Afghanistan.
Saudi Arabia is one of largest nations in the world with an area 870,000 sq mi. It is located in Western Asia, and it is the 2nd largest Arab nations following Algeria. The population of the nation is estimated to be 29 million and a majority of them are young people.
Under nutrition, as well as chronic hunger, mainly arises from widespread poverty. Individuals who are poor cannot afford to buy food. Hungry households use more than half of their income to purchase the