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This paper applies two of the famous asset pricing models in finance (Capital Assent Pricing model and Fama and French 1993 three factor model) in an emerging market with an Islamic Culture: Saudi Arabia Market (Tadwal), Generalized Methods of Moments and t Test statistical techniques were used to find the coefficients and to compare between real and expected returns.The results show that Fama and French 1993 model has more explanatory power and do a better job in explaining the changes in stock returns than the CAPM, and those developed market models can be applicable in emerging markets like Saudi Arabia. CAPM model has a clear evidence for its applicability while Fama and French Model has a clear evidence for the market return but not a clear evidence for the size and book to market return. Finally the results show that we can predict the stock prices by using any of those two models which means that the Saudi Arabia Market is inefficient pricing Market.The modernity and low number of companies has a big effect on the results, in addition the strong purchasing power and strong cash availability.Finally we recommend to appply more modern pricing models at the micro and macro level and add variables consistent with the Islamic Culture of Saudi Arabia.

This paper studies the short and long term relationship between S&P500 USA stock market index and the stock market indices of 30 countries around the world over the period June 2010-April 2015. We implement OLS regression and use error correction model to examine the short and long term relationship between the variables. Empirically, we find that there is a relationship on the short and long term between S&P500 and the indices of 27 countries from East Asia, Europe, Latin America, Middle East as well as the countries of Australia and Canada. These results conclude that the global financial crisis of 2007-2008 significantly and lengthy increased the already high level of co-movement between the USA financial market and the observed stock market for 27 countries around the world. The findings from our research are important; however, we believe that further research based on our findings is necessary.

Purpose The purpose of this paper is to assess the sources of Dubai Financial Market Index volatility shocks if they are from its own or previous shocks on the one hand, or if they are out board shocks (FSTE and S&P500) on the other. Design/methodology/approach A daily time series data were collected over the period 1st January 2014-31st December 2015 and the generalized autoregressive conditional heteroskedasticity (GARCH) methodology was implemented. Findings Empirically, the authors find that the current volatility of Dubai Financial Market Index is largely dependent on its own shocks and part of the external shock; in particular, S&P500. However, other external volatility (FSTE) cannot contribute to this volatility. Furthermore, our findings indicate that Abu Dhabi stock Exchange (APX) affects Dubai Financial Market Index. Practical implications These results conclude that Securities Regulation Department in the federal state of United Arab Emirates had captured the effect of outside shocks from the UK only, but not from USA; this is basically due to the strong ties between the two countries. Accordingly, UAE investors seek capital outside their home country within a climate of increasing overseas’ investment options in the UK. More transparency of transactions via information technology will increase the efficiency of Dubai Financial Market. Originality/value To the best of the knowledge, this is the first work that shows the external and internal sources of volatility shocks at once; previous studies have focused almost exclusively on one type of shocks. To investigate DFM volatility shocks, the authors employed GARCH methodology; this method is an advanced econometric method and is often a preferred method to depict actual effects because it provides a more real-world context than other forms when trying to predict volatility shocks of financial instruments.