Investigating the effect of political turmoil on the behavior of Tadawul stock market, KSA

Abstract

Abstract The current paper will be addressing the investigation of the impact of the political incidents on the stock market return in Saudi Arabia. It was generated from previous inquiries that needed clarifications. Yet, from previous explorations, it became clear that an examination of this case should be conducted using a cause and effect research, relying on statistical analysis, was necessary. As a result, an experimental framework, using the positivist approach, sought to develop clarifications of the issue at hand. The tested data was collected between 2000 and 2014. They represented the closing figures on the last day of each month. Dummy variables were used to determine the effect of political turmoil on stock market behavior using regression analysis. The findings indicated that the Saudi Government attempted to control political unrest by giving subsidies, thus prevent inconsistency in political events. Finally, the study increases understanding of the stock market behavior of the decision makers in order for them to predict any changes, where preventive measures against the risk involved in stock market behavior can be taken by the authorities.