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Does credit for equity investments feedback on stock market volatility? Evidence from an emerging stock market

Onour, Ibrahim (2011): Does credit for equity investments feedback on stock market volatility? Evidence from an emerging stock market.

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Abstract

This paper investigates the causal relationships between volatility in Saudi stock market and banks credit for equity investments. Our finding indicate there is a bi-directional feedback effects between the stock price volatility and banks credit loans. In other words, volatility in private credit for equity investments influence volatility in stock price and vice versa. A policy implication of such result is that regulating private credit loans in banking sector could reduce the upnormal swings in Saudi Stock prices.

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