Factor Affecting Performance of Stock Market
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 volatile political environment that prevailing in the country.
Key Words: Stock market, Foreign Direct Investment, Market Capitalization and Adjusted Saving.
1. Introduction:
A very important and integral part of a country’s financial system is the stock market and a strong financial system guarantees the financial development and growth of that country. A well organized and managed stock market encourage investment by identifying and supporting that productive projects that will ultimately lead to economic development .The stock markets are the best indicators to estimate future economic activity and stock market health is also a measure of economic strength of a country. In order to boost economic development of a country the development of stock market is vital.
The Pakistan is a country situated at an intersection of three major counties of Asia. It is a developing, lower middle-income country with GDP per capita $2500, and have a population of 187 million. The Karachi stock exchange (KSE) is the oldest stock exchange of Pakistan established in 1947. It was declared the “Best Performing Stock Market of the World for the year 2002. The other stock exchanges of the country include Lahore stock exchange (LSE) and
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 volatile political environment that prevailing in the country.
Key Words: Stock market, Foreign Direct Investment, Market Capitalization and Adjusted Saving.
1. Introduction:
A very important and integral part of a country’s financial system is the stock market and a strong financial system guarantees the financial development and growth of that country. A well organized and managed stock market encourage investment by identifying and supporting that productive projects that will ultimately lead to economic development .The stock markets are the best indicators to estimate future economic activity and stock market health is also a measure of economic strength of a country. In order to boost economic development of a country the development of stock market is vital.
The Pakistan is a country situated at an intersection of three major counties of Asia. It is a developing, lower middle-income country with GDP per capita $2500, and have a population of 187 million. The Karachi stock exchange (KSE) is the oldest stock exchange of Pakistan established in 1947. It was declared the “Best Performing Stock Market of the World for the year 2002. The other stock exchanges of the country include Lahore stock exchange (LSE) and
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