Influence of Oil Price on Non-Oil Sector Stocks in Saudi Arabia Research Paper

Influence of anoint Price on Non-Oil Sector Stocks in Saudi-Arabian-Arabian Arabia - Research Paper ExampleThe intention of this study is cover as one of the most serious economic resources in worlds economy today. Fluctuations and shocks in oil colour worths hold been studied intensively by many leading economists and several theories in economics point to the impact of oil price changes in world economies. 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 worlds list) 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 and was totally deep 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. T he Saudi Arabian oil production in 2010 was 9.1 million barrels per day which accounted for 13% of worlds total oil production. Oil is also a major driver of economic activity in Saudi Arabia. Oil related activities accounted for 47% of the GDP in 2010, and petroleum products exports amounted to $193 billion and accounted for 84% (by value) of total exports in Saudi Arabia. Therefore, oil prices play an important role in the Saudi Arabian economy. However, from the side of an investor or an enterprise in Saudi Arabian trade, it is also important to know whether oil prices have a major role to play in stock prices of non-oil sector companies too. If there is a high gear positive correlation between oil prices and non-oil sector stocks, an investor can used these stocks a hedge on their investments in oil. The outcome of this study could therefore be very useful for investors and enterprises already present or planning to enter the Saudi Arabian market. II. Literature Review Stock markets atomic number 18 largely pendant on economic activity in the country. In Saudi Arabia, as oil is a major component of the economy, stocks in Saudi Arabia are expected to indirectly depend largely on oil price movements. The influence of oil is however not limited to Saudi Arabia or other OPEC countries alone. Oil supply and price shocks have been a field of study for many economists globally. Therefore, a lot of investigate has been previously done on understanding the effect of oil prices on stocks. Where some studies have focused on impact of oil price shocks on the stock market others have focussed on the general impact of oil prices on stocks. Most of these studies are focussed on the US market and there are only a few studies look into this aspect in Saudi Arabia. Because tiny study of oil shocks is out of scope of the current research, the literature review will focus only on studies that have been done on regular influence of oil prices on stock markets. several (prenominal) studies have been done to understand the impact of oil prices on stock markets. Some of the notable ones among these are Sauter & Awerbuch (2003), Sari and Soytas (2006),