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Title:	The dynamic relationship between commodity energy prices and stock market volatility in Saudi Arabia
Authors:	Alsufyani Manal (P76472)
Supervisor:	Tamat Sarmidi, Assoc. Prof. Dr.
Keywords:	Stock market -- Saudi Arabia Commodity energy -- Saudi Arabia Universiti Kebangsaan Malaysia -- Dissertations Dissertations, Academic -- Malaysia
Issue Date:	25-Jun-2021
Description:	This thesis empirically examines three issues which are related to energy prices and the stock market volatility in Saudi Arabia, using time series analysis. Early studies had established how energy commodities affected economic variables such as gross domestic product (GDP), stock markets and exchange rate. However, commodity energy variables are characterized by by-price volatility, which is difficult to manage especially by oil-exporting countries. The consequences of the volatility of commodities energy prices were economic recession, debt crisis and exchange rate problems. Several numbers of studies have focused on one major commodity energy variable (oil) and little is known about natural gas, electricity, and petrochemical in respect of Saudi Arabia. This study considers four energy commodity prices, namely oil price (SOP), natural gas price (SGP), electricity prices (SEP), and petrochemicals prices (SPP). Other variables considered were industrial production index (IPI), interest rate (SIR) and Saudi Arabia stock market price (TASI). The first objective identifies the effect of changes in commodity energy prices on stock market volatility in Saudi Arabia for the period between April 2007 and December 2017 using monthly data. The methodology employed were GARCH (1, 1), EGARCH, TGARCH and GARCH (X) models in order to profile the Saudi stock market conditional volatility to commodities energy prices. The results indicate that the variables SPP, GOP, SGP and SIR are all insignificant to explain the volatility of the Saudi stock market TASI. The results further indicate that the ARCH and GARCH parameters are the most critical parameters to explain the volatility of the Saudi stock market. In the second objective, the study examines the dynamic relationship between commodities energy prices and stock market volatility under different regimes between April 2007 and December 2017. The study adopted the Dynamic Conditional Correlation (DCC) test to measure both the correlation and volatility between commodities energy prices and stock market volatility in Saudi Arabia. The results from the estimated model show a positive and robust significant correlation between the commodities energy prices and the volatility. The outcome further indicates evidence of time-varying correlation between commodities energy prices and stock market volatility. Finally, the study evaluates the causal and shock effects of commodity energy prices on stock market in Saudi Arabia using the Vector Error Correction Model (VECM) and Granger Causality methods. Using monthly series, sample period between April 2007 and December 2017. The result shows a significant and robust evidence of bidirectional causality between the Saudi stock market returns and interest rates in the short run. However, the study finds that stock market has causal relation with energy prices in the long run, because the interest rate is one of the control variables in the VECM. The policy implications from the causal relationship indicate that the price of one variable can be forecasted by the other. Policy makers should design an alternative source of energy for industries and households and ensure stable output and price.,Ph.D
Pages:	242
Publisher:	UKM, Bangi
Appears in Collections:	Faculty of Economy and Management / Fakulti Ekonomi dan Pengurusan

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