Literature Review Saudi Stock Market Research Paper

Literature Review Saudi Stock Market - Research Paper Example Corporate firms can raise funds from the market since it is dominated by retailers. The high the volume of trade – which is directly proportional to the number of retail traders – provides high liquidity in the market. To consider a stock market to be effective the market must reflect the consumption of relevant data. In other words, the market must be a reflection of existing data including the performance and governance of the country where the market exists (Onour, 2009). The Saudi stock market was formalized in the early 1980’s (Onour, 2009). Since then the Saudi Market has undergone several changes in accommodate new trading methods. The changes that have been witnessed include changes in the regulatory framework (Onour, 2009) and the trading methods with the introduction of electronic trading. On this paper the researcher will review past literature on the performance of the Saudi Stock Market, comparing and contrasting the performance of the market to other stock markets finally, drawing conclusions and recommendations of how to strengthen the markets performance. Key factors that are affecting the performance of the Market will also be covered in brief. The market growth in capitalization, however, has been steady most attributable to the need to invest in the money being made from the oil industry. Oil Prices and stock markets have been studied in depth by Rault & Arouri (2009). Rault & Arouri have established a linkage between performance of the stock market and oil price shocks. They cite that proper study of oil price shocks can help investors invest in the GCC countries including Saudi Arabia profitably. The Saudi stock market consists of diverse group of companies focused on the strong domestic economy rather than the international prices of oil (Jadwa Investment, 2010). Nonetheless, investors are exposed to the oil sector

Central bank Assignment Example | Topics and Well Written Essays - 1000 words

Central bank - Assignment Example Low education levels as well as underdevelopment are also a common feature in these countries and thus making them depend on foreign labour. In a strive to improve their economy, the GCC countries have tried to diversify their economic activities after realizing that the natural resources are in the process of getting depleted and therefore inculcated capital intensive projects (Cobham & Ghassan 2011). Although most investments are done nationally, it is evident that all these countries have a common goal and thus face a common problem of acquiring capital. In response to this the financial sector, which plays a critical role in economic diversification, the GCC countries have taken the initiative to develop it. The development of financial sector has been done individually with each country operating guided by its own principles. However in2009, the central bank of the GCC was proposed that would collectively operate across the whole GCC region. The GCC banking system is more of a w eb of different structures and situations rather than a homogeneous block. This is contrary to all other economic activities that tend to be common. It is to this reason that the central bank was formed (Cobham & Ghassan 2011). . ... However the location of the central bank of GCC is completely different from that of the European central bank. This creates a doubt on the overall efficiency of the proposed GCC central bank. it therefore deems necessary to understand the banks functions and objectives as well as its pros and cons, that is sources of failure as noted by other people. Discussion Structure The proposed GCC central bank will be a central bank for a common currency to be established in the GCC region. Its capital stock will be owned by the central banks of the major countries, dividing it according to their GDP ratios. Since the bank has not been established yet, its headquarters have not been stated clearly. As the GCC is located in the Arab region with almost every member country being Muslim dominated, then the bank has to take into consideration the Muslims way of living in addition to pursuing its usual activities. Relation with European Central Bank Being a multinational financial institution, the proposed GCC central bank portrays several similarities with the European central bank. Firstly, the formation of the bank aims at unifying the currency for the member states. However, there are debates that the GCC region might not be ready for a common currency. The main retardant to attaining the common currency, which also acts as the major difference between the location of the ECB and the GCC central bank is the lack of the political consensus in the latter. A common currency requires a set of common rules and regulation to prevent inflation and other economic disasters that result from inappropriate money supply trends (Cevik, Teksoz & International Monetary Fund 2012). Self-adjusting mechanism has been seen to fail after the 2008