Literature Review Saudi Stock Market Research Paper

Literature Review Saudi Stock Market - Research Paper Example Corporate firms can raise funds from the market since it is dominated by retailers. The high the volume of trade – which is directly proportional to the number of retail traders – provides high liquidity in the market. To consider a stock market to be effective the market must reflect the consumption of relevant data. In other words, the market must be a reflection of existing data including the performance and governance of the country where the market exists (Onour, 2009). The Saudi stock market was formalized in the early 1980’s (Onour, 2009). Since then the Saudi Market has undergone several changes in accommodate new trading methods. The changes that have been witnessed include changes in the regulatory framework (Onour, 2009) and the trading methods with the introduction of electronic trading. On this paper the researcher will review past literature on the performance of the Saudi Stock Market, comparing and contrasting the performance of the market to other stock markets finally, drawing conclusions and recommendations of how to strengthen the markets performance. Key factors that are affecting the performance of the Market will also be covered in brief. The market growth in capitalization, however, has been steady most attributable to the need to invest in the money being made from the oil industry. Oil Prices and stock markets have been studied in depth by Rault & Arouri (2009). Rault & Arouri have established a linkage between performance of the stock market and oil price shocks. They cite that proper study of oil price shocks can help investors invest in the GCC countries including Saudi Arabia profitably. The Saudi stock market consists of diverse group of companies focused on the strong domestic economy rather than the international prices of oil (Jadwa Investment, 2010). Nonetheless, investors are exposed to the oil sector