Share prices play an essential role in every economy in the world. The stock market generates investment of savings and financing for stock companies and all that will lead to growth in the economy in each country. In Saudi Arabia, the stock market started in 1935 with one stock company, now there are more than 160 stock companies with a market value of more than 1.8 trillion; also, the index reached its peak in 2006 at around 2000 points. This study will start with an overview of the Saudi market, defining the concept of market efficiency and showing the importance of market efficiency in stock markets. It will discuss the “random walk” hypothesis used, and the implementation of the weak-form efficiency. It will explore the context of stock markets and stock exchange prices in Saudi Arabia, the place of the study, and highlight if past information affects the stock price.
Key words: share prices, efficiency market, stock market and Saudi Arabia.
Literature Review Questions 3
Literature Review objectives 3
• Identify the importance and concept of stock market 4
• Significance of the Study 5
• Brief review of the Saudi Arabia Stock Exchange 6
LITERATURE REVIEW 7
• Overview of the financial market 7
• The Stage of development of the Saudi stock market 8
• Efficient Market Hypothesis: 9
• Weak form efficiency (Random walk): 10
Previous studies 11
• Introduction of the previous studies. 11
• Comparing studies between emerging markets and developed markets 12
• Outcome of studies having the same result: 12
• Previous studies of the Saudi stock market and Gulf Countries GCC: 13
• A few studies showed evidence of efficiency among the Gulf stock markets (GCC) 14
Disprove the efficiency market hypothesis 14
Methodology and Data 15
Literature Review Questions
In this literature review assignment an attempt will be made to answer the following questions:
o Does the past information affect the stock prices in the Saudi stock market?
o Does the Saudi stock market confirm the Random Walk Hypothesis?
Literature Review objectives
1- Identify the importance and concept of stock market.
2- Show the significance of the study
3- Methodology and Data:
4- Brief review of the Saudi Arabia Stock Exchange.
5- Overview the financial market:
6- Stages of growth in the Saudi stock market.
7- Efficiency in Stock Market Hypothesis concept and highlight.
8- Weak-form efficiency (Random walk) concept and highlight.
9- Previous studies.
10- Disprove the stock market efficiency.