The Predictability Power of Oil and Global Stock Markets on Saudi Stock Market : Application of Machine Learning Techniques

This study aims to examine the predictability power of oil prices and six international stock markets (China, France, UK, Germany, Japan, and the USA) on the Saudi stock market using five machine learning techniques. We offer evidence that oil prices are the biggest influence factor on the Saudi stock market. This result suggests that the economic structure of Saudi Arabia depends strongly on oil production. We provide evidence that the Chinese stock market is the second most influential factor due to the large trade between China and Saudi Arabia. Moreover, the co-movement between oil and six international stock markets on the Saudi stock market was consistent, especially after the Saudi market collapse in 2006. Our results provide important implications for stock market investors and policymakers