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Volume 2 Issue 5 Paper 1

The Effect of Economic Policy Uncertainty (EPU) in the US on the Stock Market Performance in Saudi Arabia

Sara Alharbi
Taif University, Saudi Arabia


The study aims to assess how the volatility and change in US economic politics affect the performance of Saudi stock markets. Hence, the study examines the interrelationship between the economic policy uncertainty and the return on stock markets; analyze and evaluate the impact of economic policy changes in the United States on stock market returns in Saudi Arabia; and discuss why and how the economic policy shocks are uncertain in the United States. The study concludes that there is an inversely / negatively link between the uncertainty of US economic policy and the monthly returns from Tadawul All Share (TASI) and that there is a statistically meaningful link between both. The uncertainty of US economic policies accounts for only 1.4% of the Saudi-Arab stock exchange’s share returns. In other words, around 98 per cent of other factors contribute to the monthly share returns, other than the uncertainty of economic policy. Therefore, it is statistically evident that the underlying variables have an endorsed relationship, which ensures that the economic policy of the United States has a statistical impact on monthly stock market returns for Tadawul All share (TASI).

Keywords: Economic policy uncertainty, Stock market performance, US economic policy, Tadawul All Share (TASI)

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