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Volume :24 Issue : 94 1999      Add To Cart                                                                    Download

MACROECONOMIC DETERMINANTS OF STOCK PRICES IN SAUDI ARABIA

Auther : Dr. Abdullah H. Al-Batel

 

Literature on the development process stresses the importance of capital accumulation, and the role of capital markets and financial institutions in that process. Capital markets enable investing units to raise investment funds through stocks and bonds issues and provide savers and financial institutions with a further outlet for their funds. They enhance growth to the extent that they serve to allocate resources to the places in the economic system where their social return is the greatest. They have an important role in the allocation of resources, both directly as a source of funds and as a determinant of firm’s value and borrowing capacity. In the meantime, stock markets are thought to have substantial influence on consumption behavior of households and investment decisions of business firms. A change in the real value of stocks is likely to have impacts on consumption demand and investment spending. In this regard, the prospect for equity values is a concern for public policy. This is because, the primary goal of a national policy is to achieve a high rate of capital formation and also because movements of stock prices are viewed as prime indicator of the private sector’s evaluation of current and future business conditions. The valuation of a nation’s productive assets in the stock market will influence business’s willingness and ability to undertake new investment.

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May 18, 2017

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