Factor Affecting Performance of Stock Market

13592 WordsJun 18, 201355 Pages
Abstract This study examines the effects of foreign direct investment, market capitalization and adjusted on stock market using time series data from 1991 to 2011. A result shows that there is a significant relationship between foreign direct investment and stock market, as well as there is also a significant relationship between adjusted saving and stock market but there is insignificant relationship between market capitalization and stock market. Foreign direct investment, Market capitalization and Adjusted saving explains 90% of variation in the stock market. It is recommended that the government can encourage FDI in Pakistan to increase its savings by taking various steps provide incentives and save foreign investors interest in a…show more content…
The results have shown positive statistically strong relationship between FDI and market capitalization thus reflecting the complementary role of FDI in the stock market development of Pakistan. Raza et al. (2012) investigated the role of foreign direct investment in developing host country’s stock markets and to examine whether they are related or not. The results disclosed a positive impact of foreign direct investment along with other explanatory variables in developing Stock markets of Pakistan. Adam and Tweneboah (2008) analyzed the impact of Foreign Direct Investment (FDI) on stock market development in Ghana. Market capitalization, FDI, stock market development and exchange rate variable are considered and found long-run relationship between FDI and stock market development in Ghana. Raza and Jawaid (2012) investigated the effects of foreign capital inflows and economic growth on stock market capitalization in 18 Asian countries by using the panel data from the period of 2000–2010 and found that foreign direct investment has significant negative and economic growth has significant positive relationship with the stock market capitalization, whereas, the results of workers’ remittances is found insignificant in long run. However, no causal relationship is found in between workers’ remittances and stock market capitalization. They suggested that investor should not idealize the inflow of workers’ remittances to
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