scholarly journals Stock Market development and economic growth. Should we be concerned about measurement?

2018 ◽  
Author(s):  
Richard Darko
Keyword(s):  
Stock Market ◽  
Principal Component ◽  
Growth Effect ◽  
Market Development ◽  
Stock Exchanges ◽  
Market Returns ◽  
Stock Market Returns ◽  
Stock Market Development ◽  
Development Indicators ◽  
Positive Growth

Does the choice of proxy for stock market development matter? This paper suggests that the growth effect of stock market development is sensitive to the choice of proxy and using alternative financial development indicators have practically no influence on the results. We found that using either the stock market capitalization to GDP ratio or the stock market returns; have a positive and significant effect on growth.  However, we cannot make same conclusion when one uses either the  ratio of total value of trades on the major stock exchanges to GDP or stock market turnover ratio to proxy for stock market development as the coefficient on these variables were found to be statistically insignificant. The indexes extracted from principal component analysis confirm the sensitivity of the effect to the choice of proxy. This finding suggest that stock market development is a conceptual terms, thus, representing it with single indicators make it impossible to identify which stock market development indicators have a significant positive growth effects.

scholarly journals Financial contagion and 2016 oil crisis: a factor analysis

2020 ◽  
Author(s):  
Turki Maya
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Principal Component ◽  
Financial Contagion ◽  
Market Returns ◽  
Component Structure ◽  
Stock Market Returns ◽  
Oil Crisis ◽  
Market Indexes ◽  
Variance Explained

<p>The paper tries to answer the following question: could the 2016 oil price crisis generate financial contagion among stock markets? </p> <p>The study period is composed of two sub-periods; a quiet one from 3/01/2012 to 01/08/2014 and turbulent one from 04/08/2014 to 25/05/2016. Raw data consists of daily international stock market indexes prices. The co-movements of the stock market returns are analyzed through a principal component analysis (PCA).</p> <p>The results revealed that the <em>KMO</em> index (Kaiser-Mayer-Olkin) is higher during the turbulent period than during the quiet one and that the proportion of variance explained by the first component during the turbulent period reached 35% while during the quiet one it represented only 26,7%.Regarding the component structure, for the turbulent period, three factors are able to explain the stock markets indexes movements while for the quiet period four factors are required. </p> <p>The findings give more credit to the thesis supporting the linkage between cross correlation and financial contagion and classify the 2016 oil crisis, as just a coupling episode and not an extreme one.</p>

scholarly journals Impact of Stock Market Development on Economic Growth in BRICS

2018 ◽  
Vol 10 (1) ◽  
pp. 23
Author(s):  
Godfrey Osaseri ◽  
Ifuero Osad Osamwonyi
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Stock Market ◽  
World Bank ◽  
Time Series Data ◽  
Market Development ◽  
Series Data ◽  
Stock Market Development ◽  
Development Indicators ◽  
Effect Estimation

The study examines Stock Market development and economic growth in BRICS, Quarterly time series data for the period 1994QI to 2015Q4 were sourced from World Bank Indicator. The Panel Least Squares based on the fixed effect estimation was employed to determine how stock market development impacts on the economic growth of BRICS. Diagnostics tests were conducted to ascertain the robustness and stability of the regression results. The findings reveal that stock market development exerts significant impact on the economic growth. The study revealed that there is a positive correlation between stock market development indicators and BRICS’s economic growth. The study recommends that the weakness of each of the BRICS member country should be taken as policy focus and strategies necessary to strengthen them should be swiftly applied by the governments.

scholarly journals DOES STOCK MARKET DEVELOPMENT PLAY ANY ROLE IN THE EFFECT OF FDI ON ECONOMIC GROWTH IN NIGERIA? AN EMPIRICAL INVESTIGATION

2016 ◽  
pp. 51-61
Author(s):  
Oziengbe Scott Aigheyisi
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Time Series Data ◽  
Ordinary Least Squares ◽  
Growth Effect ◽  
Market Development ◽  
Series Data ◽  
Domestic Investment ◽  
Government Consumption ◽  
Stock Market Development

The objective of the paper is to investigate whether stock market development plays any role in the effect of foreign direct investment (FDI) on economic growth in Nigeria. Using annual time series data that span the period from 1981 to 2014, and employing the fully modified ordinary least squares (FMOLS) estimation technique, the empirical evidence indicates that FDI, domestic investment and stock market development positively and significantly affect economic growth, but the effect of the interaction between stock market development and FDI on economic growth is negative and significant, indicating that the Nigerian bourse is not yet fully developed to engender positive growth effect of FDI. The study further finds that government consumption expenditure and trade openness adversely affect the growth of the country’s real GDP per capita. Recommendations of the paper include efforts by the government to design and implement programmes and policies aimed at enhancing the attractiveness of the country to foreign and local investors, efforts by capital market regulators to enhance stock market efficiency, reduction of government consumption expenditures and import control.

scholarly journals Stock Market Development and Economic Growth in India

2014 ◽  
Vol 3 (3) ◽  
pp. 30-46 ◽  
Author(s):  
Srinivasan Palamalai ◽  
Karthigai Prakasam
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Economic Activity ◽  
Positive Influence ◽  
Market Development ◽  
Stock Market Development ◽  
Development Indicators ◽  
Turnover Ratio ◽  
Long Run ◽  
Market Capitalisation

The link between stock market development and economic activity has always been the subject of considerable debate in the field of economics and it raises empirical question whether stock market development influences economic activity or whether it is a consequence of increased economic activity. This study attempts to investigate the direction of causality between stock market development and economic growth in the Indian context. Using the cointegration and causality tests for the period June 1991 to June 2013, the study confirms a well defined long-run equilibrium relationship between the stock market development indicators and economic growth in India. The empirical results show bidirectional causality between market capitalisation and economic growth and unidirectional causality from turnover ratio to economic growth in the long-run and short-run. By and large, it can be inferred that the stock market development indicators viz. market capitalisation and turnover ratio have a positive influence on economic growth in India.

scholarly journals Economic Growth and the Development of Financial Markets: Some African Evidence

2013 ◽  
Vol 1 (2) ◽  
pp. 1-25
Author(s):  
Félix Zogning Nguimeya ◽  
Gaétan Breton
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Markets ◽  
Significant Relationship ◽  
Stock Markets ◽  
Market Development ◽  
Stock Market Development ◽  
The Real ◽  
Development Indicators ◽  
Causality Tests

The purpose of this study is to determine if African stock markets have contributed to a better allocation of savings and economic growth in the countries in question. Our results reveal a strong and significant relationship between aggregate economic growth and stock market development indicators. Causality tests indicate that the real sphere involves the financial sphere for relatively new markets.

scholarly journals Financial development and economic growth: panel evidence from BRICS

2019 ◽  
Vol 24 (47) ◽  
pp. 113-126 ◽  
Author(s):  
Biplab Kumar Guru ◽  
Inder Sekhar Yadav
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Banking Sector ◽  
Market Development ◽  
Content Type ◽  
Stock Market Development ◽  
Development Indicators ◽  
Banking Sector Development ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators. Design/methodology/approach To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS-GMM), the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS), whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used. Findings The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one-step SYS-GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth. Practical implications A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth. Originality/value The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.

scholarly journals The Measurement Method of Investor Sentiment and Its Relationship with Stock Market

2021 ◽  
Vol 2021 ◽  
pp. 1-11
Author(s):  
Jiangshan Hu ◽  
Yunyun Sui ◽  
Fang Ma
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Investor Sentiment ◽  
Principal Component ◽  
Market Volatility ◽  
Response Analysis ◽  
Stock Market Volatility ◽  
Market Returns ◽  
Stock Market Returns ◽  
The Impact

Investor sentiment is a hot topic in behavioral finance. How to measure investor sentiment? Is the influence of investor sentiment on the stock market symmetrical? That is all we need to think about. Therefore, this paper firstly selects five emotional proxy variables and constructs an investor sentiment composite index by principal component analysis. Secondly, the MS-VAR model is employed to study the dynamic relationship among investor sentiment, stock market returns, and volatility. Using the model MSIH (2)-VAR (2), we found that the relationship among the investor sentiment, stock returns, and volatility is different in different regimes. The results of orthogonal cumulative impulse response analysis showed that the shock to investor sentiment has a significant impact on stock market returns, and this impact in the bullish stock market is significantly higher than in the bearish stock market. The impact of the shock to stock market returns on investor sentiment and stock market volatility is relatively significant. The shock to stock market volatility has significant effects on the stock market returns. Overall, the influence of investor sentiment on the stock market is asymmetric; that is, in different regimes of the stock market, the impact of investor sentiment on the stock market is different. Realizing this, investors can better understand and grasp the market, guiding their own investment behavior. Other researchers can also further study the measurement of investor sentiment on this basis to better guide investors’ behavior.

scholarly journals Stock market liberalization: implications on cost of capital in emerging Islamic countries

2019 ◽  
Vol 3 (2) ◽  
pp. 157-178
Author(s):  
Bilal İlhan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Cost Of Capital ◽  
Market Development ◽  
Stock Exchanges ◽  
Market Liberalization ◽  
Content Type ◽  
Stock Market Development ◽  
Stock Market Liberalization ◽  
Islamic Countries

Purpose Most of the major Islamic countries’ stock exchanges have not been able to perform at the same pace with the major emerging countries’ stock exchanges since the mid of 1990s. The purpose of this paper is to examine the implications of stock market liberalization on cost of capital as one of the crucial driver to stock market development and physical investment growth in emerging Islamic countries. Design/methodology/approach This study employs static panel data techniques on the sample of seven emerging Islamic countries over the years 1989-2008. Findings The findings of this study suggest that stock market liberalization significantly reduces cost of capital in the stock markets of sample Islamic countries, which carries policy-oriented implications. Reduction in the cost of capital increases the number of exchange-traded companies, profitability of projects and aggregate investment level; therefore, the study findings are highly concerned by the economic policymakers, corporations and investors alike. Research limitations/implications In the literature, different proxies are employed to measure stock market liberalization and cost of capital as well. Due to data limitations, this study could not employ different proxies for both, especially for stock market liberalization, for robustness purpose. That limitation further restricted the coverage of Islamic stock markets and time period. Therefore, generalization of the study results for overall Islamic stock markets can be slightly drawn. Originality/value The paper provides further understanding regarding the effects of SML on cost of capital, thereby indirectly on the stock market development, in the context of EIC.

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