Factors Affecting Stock Prices in the UAE Financial Markets

The stock market in the United Arab Emirates (UAE) is one of the emerging markets. It needs to be developed to operate efficiently and effectively in a competitive stock market environment. The current study represents an attempt to investigate the main factors determining stock prices in the UAE stock markets. The data of our study covers the period from 1990 to 2005. The sample consists of 17 companies based on the availability of the data for that period. The regression model was run for the UAE financial markets sample with five independent variables after dropping oil price and dividend per share because of multicollinearity problems. The findings of this study are consistent with most previous studies. Results indicate a strong and positive impact of EPS (earnings per share) on the UAE stock prices. The estimated coefficients of money supply and GDP were, as expected, positive but statistically insignificant. Moreover, the estimated coefficients of consumer price index and interest rate were as expected, negative and statistically significant at the 1% level in the case of consumer price index, but statistically insignificant in the case of interest rate.