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The Impact of Oil Price Fluctuations on Saudi Arabia Stock Market: A Vector Error-Correction Model Analysis

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  • Nouf Bin Ayyaf Al-Mogren

    (Department of Finance, College of Business Administration, Prince Sultan University, Riyadh, Saudi Arabia)

Abstract

This paper examine the relationship between oil prices and the Saudi Stock Market by testing the null hypothesis that oil prices are statistically significant predictors of the Saudi stock market s movements for the period 2000-2019. Finding the time series to be cointegrated, the paper performs the testing procedure by employing a Vector Error Correction Model (VECM) and results obtained indicate that oil prices are not statistically significant predictors of Saudi stock market movements, thus giving us reason to reject our null hypothesis. We also find evidence that the New York Stock Exchange NYSE is a better predictor of both the Saudi stock index and oil price fluctuations, paving the way for further research into these correlations in the future.

Suggested Citation

  • Nouf Bin Ayyaf Al-Mogren, 2020. "The Impact of Oil Price Fluctuations on Saudi Arabia Stock Market: A Vector Error-Correction Model Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 310-317.
    • Handle: RePEc:eco:journ2:2020-06-41
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    More about this item

    Keywords

    Oil price; stock exchange; Vector Error Correction Model; Saudi Arabia;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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