CHANGE IN OIL PRICES AND ITS EFFECT ON SAUDI STOCK EXCHANGE (TADAWUL)

Abstract

Behavioral finance significance has been widely accepted. This subject investigates the behavior of public, private sector and individual’s investment decisions after the downward movement in oil prices, This study can help understand how sectors react to an international event, such as oil prices since, Saudi Arabia has an oil-based economy, the changes in oil prices can cause a panic and sentimentally driven investment decisions, This study used a self-administered questionnaire for collecting the responses from 47 individuals in the society, also using secondary data analysis to understand the public and private sectors behavioral in the market. Findings confirm that most investors believe oil prices downward movement do affect Tadawul but they didn’t react to their invested capital, meanwhile few investors withdraw their money from the market, reduced invested money, injected more money and reposition their investment between different sectors. The purpose behind the descending pattern of TASI since the decrease in oil costs is a result of the frenzy in offering due to hosed financial specialist estimation. As oil costs tumbled, numerous retail financial specialists expected that lower oil costs would incite the Saudi government to moderate or, far more detestable, cut back on consumption, pressing corporate benefits in the more extended term. Developments in the cost of oil impacts speculation by both people in general and private segment, which influence the share trading system, the connection of the TASI to oil costs in the course of the most recent eight years is equivalent to 0.355, or, in other words solid given the reliance of the economy on oil. There has been a reasonable dissimilarity between the TASI and oil costs for a great part of the ongoing past. The period between March 2013 to March 2015 demonstrates a negative connection, despite the fact that it turns out to be progressively positive from September 2014, as oil costs start to decay quickly.