Stock market performance and economic relationship

Zheng Liu and Mark M. Spiegel Historical data indicate a strong relationship between the age distribution of the U. A key demographic trend is the aging of the baby boom generation. As they reach retirement age, they are likely to shift from buying stocks to selling their equity holdings to finance retirement.

Stock market performance and economic relationship

African Journal of Business Management Vol. Accepted 28 September, The capital market plays an essential role in the growth of commerce and industry which ultimately affects the economy of the country to a large extent.

This is the rationale that the industrial bodies, government advisors and even the central bank of the country keep a close eye on the activities of the stock market. This paper explores the relationship between the stock market development and economic growth in Pakistan for the period of to We investigated the stock market development and economic growth relationship by using the two major measures of stock market development, namely: The results revealed that economic growth can be attained by increasing the size of the stock markets of a country as well as the market capitalization in an emerging market like Pakistan.

Pakistan, stock market development, economic growth, augmented dicky-fuller test, market capitalization, liquidity, human development index, emerging economies. As such, the emphasis has remained on economic growth and stock market development. Being an important pillar of the economy of a country, the stock market plays a pivotal role in the growth of the industry and commerce which ultimately affects the economy of the country to a large extent.

This is the rationale that the industrial bodies, government advisors and even the central bank of the country keep a close eye of observation on the activities of the stock market.

Loan Rates Affect Stocks

Some of these factors include liquidity and stock market capitalization as well as the turnover of stocks in the market. In this paper, the relationship between stock market development and economic growth in Pakistan for the period of to was investigated.

Stock market performance and economic relationship

The economy of Pakistan has suffered, in several decades, from low level of foreign investment, except for few years of the current decade, and it has increased the deficit of imports and exports along with untenable budgetary deficits, high inflation and hemorrhaging foreign exchange reserves.

A total of companies were listed with the market capitalization of Rs. As such, there is a frantic need to investigate the relationship of economic growth of the Pakistan economy and stock market development, keeping in view these two facets of macroeconomic growth indicators.

The present study takes into consideration the two key Afr. Market capitalization has been used as a proxy for the size of the KSE. Theoretically, this market mea- sure is expected to be positively correlated with the ability to mobilize capital and diversify risk on economy-wide basis.

Liquidity can be defined as the ability of the market to absorb fairly, large volumes of stock trades without drastically affecting the price, and can be calculated as a value of traded shares divided by gross domestic product GDP.

This measure has been taken to complement the market capitalization. Although, a market may be large in size, there may, however, be low level of shares trading.

Stock market performance and economic relationship

As per the available literature, the related studies depicting the relationship of human and stock market development on economic growth of Pakistan could not be found.

The present study, which is a pioneer in its nature, will fill the research gap existing in the field of stock market development and economic growth and will provide, to the readers, an insight into the factors playing their role in the economic growth in Pakistan.

A well organized and managed stock market arouses investment opportunities in the country by recognizing and financing productive projects that ultimately lead to economic activity, allocates capital efficiently, mobilizes domestic savings, helps diversifying risks and facilitates exchange of goods and services Mishkin, ; Caporale et al.

Greenwood and Smith reported that the cost of mobilizing savings is less in the large stock markets, while Kyle and Holmstrom and Tirole explained that liquid stock markets improve the market efficiency by delivering the timely and accurate information to the investor. Obstfeld a; b argued that the international integrated stock markets can increase the investor risk, but at the same time provide more opportunities to investors to do diversified investment internationally.

Some studies reported that stock market liquidity and size is crucial for growth Bencivenga et al.

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Although the investments in capital markets are much profitable for investors, investors do not want to block their savings for long periods. Liquid equity markets are the solution for the aforementioned problem long term investment as they provide such assets which can be sold easily and inexpensively by the investor.

Abstract In this paper, the relationship between performance and liquidity of shares listed on the Tehran Stock Exchange investigated. In countries where the capital market is . that there is a long-run relationship between stock market performance and economic growth. Wild and Lebdaoui () studied the relationship between stock market development and economic growth in Morocco for the period from to on quarterly basis. relationship between stock market development and economic growth, more and more case studies might better identify the causal linkage between stock market trends and economic growth [37]. The present research study therefore followed stock market performance and economic growth in Kenya. Research Objectives.

On the other hand, the firms also have permanent access to capital raised through equity issues Levine and Zervos, How can new stock markets increase economic growth?relationship between inflation and capital market performance.

The result suggest that the Central Bank of through which it affects the stock market and ultimately economic growth. In studying the impact of Real Gross Domestic Product (RGDP), inflation relationship and stock .

we analyze the conditional relationship between risk and return in Iran by estimating the relationship between various sources of risk -- market risk, oil price risk, exchange rate risk, gold price risk, inflation risk, skewness, and kurtosis -- and the stock return in the Tehran Stock.

indicators of the stock market performance and economic activities. In Nigeria, several authors have attempted to investigate the relationship between stock market development and economic growths.

Hank Lobel

Empirical Study Stock Market Economic Performance Capital Market Stock Price These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves. Abstract In this paper, the relationship between performance and liquidity of shares listed on the Tehran Stock Exchange investigated.

In countries where the capital market is . We investigated the stock market development and economic growth relationship by using the two major measures of stock market development, namely: size of the market and liquidity prevalent in the.

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