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Investigating the Impact of Oil Prices Changes on Financial Market Efficiency in Saudi Arabia for the Period (1980-2018): ARDL Approach

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  • Saif Sallam Alhakimi

    (University of Bisha, KSA and University of Hodeidah, Yemen,)

  • Hussein Hamood Sharaf-Addin

    (University of Bisha, KSA and Thamar University, Yemen)

Abstract

The impact of macroeconomic variables on the financial market efficiency has been a hot topic for decades. Thus, this study investigates the effect of oil price changes on the financial market performance using the estimation of Auto-Regressive Distributed Lag (ARDL) technique in Saudi Arabia for the period 1980-2018. The results revealed a long-run causality between the exchange rate, return on investment, and oil prices towards the financial market efficiency. However, only inflation and return on investment have causality effects on financial market efficiency in the short run. In addition, the exchange rate and oil price do not have causality running to economic market efficiency. Thus, both the short-run and long-run causality effects should be considered as guidelines to be followed by policymakers to avoid any misleading macroeconomic strategies in future strategic planning. The speed of adjustment reported from estimating the Conditional Error Correction Regression is (-0.114527). Also, the model was found stable from using both the CUSUM and CUSUMQ statistics.

Suggested Citation

  • Saif Sallam Alhakimi & Hussein Hamood Sharaf-Addin, 2022. "Investigating the Impact of Oil Prices Changes on Financial Market Efficiency in Saudi Arabia for the Period (1980-2018): ARDL Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 420-426.
    • Handle: RePEc:eco:journ2:2022-01-53
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    2. Nawaf N. Hamadneh & Jamil J. Jaber & Saratha Sathasivam, 2024. "Estimating Volatility of Saudi Stock Market Using Hybrid Dynamic Evolving Neural Fuzzy Inference System Models," JRFM, MDPI, vol. 17(8), pages 1-22, August.

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    More about this item

    Keywords

    Oil Price; Cointegration; ARDL; Financial Market Efficiency; Economic Growth;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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