Does Stock Market Performance Affect Economic Growth? Empirical Evidence from Saudi Arabia

Rasasi, Moayad H. Al; Alsabban, Soleman O.; Alarfaj, Omar

doi:10.5539/ijef.v11n9p21

Cited by 5 publications

(5 citation statements)

References 26 publications

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“…Furthermore, statistical tests revealed stability of the model. At last, the results obtained here are in line with the findings of Lei and Mishra (2016), Bakwena and Bodman (2011), Onuora (2019), Kehinde et al (2013), Yadirichukwu and Chigbu (2014), and Alrassi et al (2019) and others.…”

Section: The Discussionsupporting

confidence: 93%

“…Furthermore, the powerful effect of financial intermediaries depends on whether the country is an oil-based economy or not. Lastly, Alrassi et al (2019) pointed out empirically that stock market prices had a positive and significant effect on real economic development in Saudi Arabia during the period of 2010: Q1 till 2018: Q4.…”

Section: Review Of Related and Empirical Literaturementioning

confidence: 99%

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Capital Market Development and Economic Growth: An Ardl Approach for Saudi Arabia, 1985–2018

Algaeed

2020

Journal of Business Economics and Management

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The aim of this paper is to analyze and test the effects of capital market development on the per-capita GDP growth in Saudi Arabian economy covering the period of 1985-2018. An ARDL, FMOLS and Johansen tests are implemented. The stock market indicators: share price index, capitalization, liquidity, number of share transactions, and number of shares are employed using a log-linear eclectic model designed to fit the availability of data. Capitalization and liquidity came up with negative signs, contrary to the findings of lots of studies in economic literature. However, the share price index, number of shares traded, and the ratio of number of share transactions had the right signs as expected a priori. The findings raise serious questions about the size of the market, the steps and efforts that have been taken to deepen the capital market and their consequences on the function and potency of capital market in fostering per-capita GDP growth. Applying Granger causality test, share price index, market capitalization and number of shares traded do not granger cause per-capita GDP. They are significant at 5 percent level. Capital market authority (CMA) should draw a road map to accelerate deepening the capital market in order to serve economic growth.

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Section: The Discussionsupporting

confidence: 93%

Section: Review Of Related and Empirical Literaturementioning

confidence: 99%

Capital Market Development and Economic Growth: An Ardl Approach for Saudi Arabia, 1985–2018

Algaeed

2020

Journal of Business Economics and Management

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“…The common underlying factor for these four sectoral indices was the considerable response of these sectoral indices to the OP market, which can be driven by the fact that OP variations influence the level of real economic activity in these selected sectors, which in turn affect SPs through changes in the values of expected future cash flows (Jouini & Khallouli, 2019). Moreover, these findings support the significant linkage between money demand and SPs in the long run (Al Rasasi, Rawah, et al, 2019) and reveal the causal relationship between stock market returns and economic activities in the Saudi economy (Al Rasasi, Alsabban, et al, 2019).…”

Section: Conclusion and Policy Implicationssupporting

confidence: 69%

Asymmetric Linkages of Oil Prices, Money Supply, and TASI on Sectoral Stock Prices in Saudi Arabia: A Non-Linear ARDL Approach

Amin

Rehman

2022

SAGE Open

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This study examines the asymmetric effects of oil prices, money supply, and the Tadawul All Share Index (TASI) on sectoral stock prices in Saudi Arabia. By applying a nonlinear auto-regressive distributive lag (NARDL) approach to monthly data spanning from January 2007 to December 2016, we found that the positive shocks of oil prices were more than the negative ones in the building and construction, energy and utilities, and petrochemical sectors, while higher oil prices adversely influenced the stock price of the bank and financial service sector. We identified the long-run and short-run asymmetric relationships of the Saudi stock market development on the stock prices of bank and financial services, energy and utilities, and the petrochemical sector and only a long-running asymmetric relationship with the building and construction sector. We also found the absence of long-run and short-run asymmetric impact of money supply on three sectors, namely, building and construction, energy and utilities, and the petrochemical sector except for the bank and financial service sector where only a long-running asymmetric relation was observed. These findings are appropriate for investors and portfolio managers to make judicious investment decisions. Policymakers should diversify their economic sectors apart from the oil dependencies to achieve the Vision 2030.

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“…14 Al Rasasi et al (2019) examine the stock market and economic growth nexus in Saudi Arabia. They find a significant long-run relationship between the real price level of the main market index and real economic activity, indicating that stock prices have a significant impact on real economic growth.…”

Section: Notesmentioning

confidence: 99%

The COVID-19 Outbreak and Risk–Return Spillovers between Main and SME Stock Markets in the MENA Region

Al-Nassar

Makram

2022

IJFS

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This study investigates return and asymmetric volatility spillovers and dynamic correlations between the main and small and medium-sized enterprise (SME) stock markets in Saudi Arabia and Egypt for the periods before and during the COVID-19 pandemic. Return and volatility spillovers are modelled using a VAR-asymmetric BEKK–GARCH (1,1) model, while a VAR-asymmetric DCC–GARCH (1,1) model is employed to model the dynamic conditional correlations between these markets, which are then used to determine and explore portfolio design and hedging implications. The results show that while bidirectional return spillovers between the main and SME stock markets are limited to Saudi Arabia, shock and volatility spillovers have different characteristics and dynamics in both main–SME market pairs. In addition, the dynamic correlations between the main and SME markets are mostly positive and have notably increased during the COVID-19 pandemic, particularly in Saudi Arabia, suggesting that adding SME stocks to a main stock portfolio enhances its risk-adjusted return, especially during tranquil market phases. One practical implication of our results is that the development of SME stock markets can indirectly contribute to economic development via the main market channel and provide an avenue for portfolio diversification and risk management.

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Does Stock Market Performance Affect Economic Growth? Empirical Evidence from Saudi Arabia

Cited by 5 publications

References 26 publications

Capital Market Development and Economic Growth: An Ardl Approach for Saudi Arabia, 1985–2018

Capital Market Development and Economic Growth: An Ardl Approach for Saudi Arabia, 1985–2018

Asymmetric Linkages of Oil Prices, Money Supply, and TASI on Sectoral Stock Prices in Saudi Arabia: A Non-Linear ARDL Approach

The COVID-19 Outbreak and Risk–Return Spillovers between Main and SME Stock Markets in the MENA Region

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