Volume 11, Issue 4 (April 2024), Pages: 45-51

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 Original Research Paper

Is there a “flight to liquidity” phenomenon in the Saudi stock market?

 Author(s): 

 Héla Bensoltane ^{1, 2,} *

 Affiliation(s):

 ¹Department of Economics and Finance, College of Business Administration, University of Ha’il, Ha’il, Saudi Arabia
 ²Univ. Manouba, ESCT, LARIMRAF LR21ES29, Campus Universitaire Manouba, 2010, Tunisia

 Full text

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 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0002-0615-4807

 Digital Object Identifier (DOI)

 https://doi.org/10.21833/ijaas.2024.04.006

 Abstract

The study examines how market illiquidity shocks affect stock prices and explores the "flight to liquidity" phenomenon in the largest stock market in the Middle East, specifically the Saudi stock market. It analyzes the relationship between these shocks and stock prices to understand the impact on both small and large firms. Utilizing a comprehensive database that contains daily data of all stocks listed on the Saudi stock market for over 20 years, the research evaluates the illiquidity of each stock and the entire market on a weekly basis. Market illiquidity shocks are determined using an autoregressive model, and the effect of these shocks on Saudi stock prices is assessed through illiquidity betas in linear regressions for both large and small firms. Initial findings show that illiquidity shocks were significant during periods of oil price declines and global financial crises. The results confirm that stock prices fall in response to market illiquidity shocks, with the impact varying by firm size; larger firms' stocks are less affected, indicating a flight to liquidity towards larger firms during market downturns. This pattern aligns with observations in the US and some emerging markets.

 © 2024 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords

 Market illiquidity shocks, Stock prices, Flight to liquidity, Saudi stock market, Firm size impact

 Article history

 Received 15 December 2023, Received in revised form 22 March 2024, Accepted 26 March 2024

 Acknowledgment 

No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Bensoltane H (2024). Is there a “flight to liquidity” phenomenon in the Saudi stock market? International Journal of Advanced and Applied Sciences, 11(4): 45-51

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 Figures

 Fig. 1 Fig. 2 Fig. 3

 Tables

 Table 1 Table 2 Table 3 Table 4 

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