THE RELATIONSHIP BETWEEN SAUDI STOCK MARKET AND EXCHANGE RATE MARKET

Abstract

This paper aims to investigate the impact of stock market on the exchange rates and the way around in Saudi Arabia. The Questions to be answered are: Dose exchange-rate market has an affect on stock market in Saudi Arabia? Or Does stock market has an affect on exchange-rate market? Is there a correlation between the Stock Market prices and the exchange rates? The importance of study being that that the result will help to determine the directional relationship moving from the Stock Market to Exchange Rate Market or vise versa, and to modify steps that can be taken by government to improve the economic in Saudi Arabia. The study is based on secondary data for the period from 2010 to 2015. Ordinary Least Square Regression model and correlation is used for examining the relationship of the two variables, which are Saudi Stock Prices and Exchange Rates Prices. The results showed a significant statistical relationship between Stock Prices and Exchange Rates Prices; also, support the positive relationship of between Exchange Rate Prices and Stock Prices. Such results might have implications for international portfolio management and currency hedging.