THE RELATIONSHIP BETWEEN STOCK MARKET PRICES AND MONEY SUPPLY IN SAUDI ARABIA

Abstract

As Saudi Arabia is an economy, which depends on the oil, prices, thus the change in the oil prices affect the stock market price. While sentimental changes regularly affect money markets quickly, real changes will produce results over the more extended term. In the event that oil costs stay low, this at last influences monetary arrangement structure, private sector action and corporate profitability. The purpose of this research is to analyze the relationship between stock price and money supply in Saudi Arabia. This research contributes to the literature on Saudi Arabian Economy, and shows how economic factors work and how they affect each other and lead to changes in stock market price. It also shows the summery statistic for (unemployment rate, government expenditure, GDP, stock index, money supply, public debt.). The data period that considered for this study is from 1980 to 2017, obtained from World Development Indicators (WDI) and Bloomberg. Least Squares OLS method is sued to obtain the statistical result of this study. This research finds a negative and statistically significant relationship between money supply and stock prices. This research helps the investors in making a good decision of investment on stock market.