Market liquidity is a precondition for market efficiency but its sudden disappearance may escalate into a systemic crisis. Several studies analysing financial crises revealed that market illiquidity was often involved in the major global financial crises and stock crashes (Amihud et al., 1990; Perderson, 2009; Aragon et al., 2012, Qiao et al., 2020). Liquidity is a Multidimensional concept. This research focuses on market illiquidity that is reflected by temporary price deviations caused by the order flow, i.e. the price impact. The objective of this research is to study the relationship over time between returns and shocks in market illiquidity. For empirical evidence, this relationship is studied using data of Small and Medium-sized Enterprises (SMEs) listed on the Saudi Stock Exchange. Saudi SMEs attracts considerable attention since they allow diversification of Saudi economy. Stock prices could be affected by illiquidity shocks has been examined and test whether this effect varies according to the enterprise size. Estimation of shocks in market illiquidity is based on the measure of Amihud (2002) at weekly frequency. Results show that shocks in market illiquidity significantly lower contemporaneous stock prices of Saudi SMEs, except those of the “Real estate management and development” sector. This industry group is insensitive to illiquidity shocks. In addition, estimation results indicate that illiquidity level of small enterprises portfolio is more volatile over time than that of medium enterprises portfolio, but both portfolios have the same illiquidity level. The findings reveal also that portfolio returns of small enterprises portfolio are more negatively affected by market illiquidity shocks than those of medium enterprises portfolio. While previous studies showed that market illiquidity affect more the most illiquid stocks, our study concludes that market illiquidity affect more stocks whose illiquidity levels are more volatile.