The Effect of Direct Foreign Investment on Stock Price Volatility in the Saudi Market

Suha Alawi ()

Asian Economic and Financial Review, 2019, vol. 9, issue 8, 875-887

Abstract: Vision 2030 serves as an area of interest for showcasing the various factors which can impact the Saudi stock market. This study investigated the effect of foreign direct investment on stock price volatility in the Saudi market. Considering that the optimal investment decisions are based on understanding the fluctuations that can take place on the returns with time, it was important to determine the volatility. The study covers 2005 to 2018 and developed its model based on the independent and dependent variables. For instance, foreign direct investment, FDI inflow rate, interest rate, exchange rate, and inflation rate were treated as independent variables in the model. Stock price volatility was treated as a dependent variable. The results showed that foreign direct investment had insignificantly positive impact on stock price volatility. Amongst the control variables, the FDI inflow rate was found statistically significant and positive, whereas the interest rate was found negatively insignificant to stock price volatility. However, the exchange rate was found to be negatively insignificant to stock price volatility. The study concluded that Saudi investment was unable to provide better business opportunities.

Keywords: Foreign direct investment; Investment; Saudi Arabia; Stock price volatility; Vision 2030; Stock price; Panel data. (search for similar items in EconPapers)
Date: 2019
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