What drives the stock market growth? A case of a volatile emerging  economy

Mujahid Hussain; Timo Korkeamäki; Danielle Xu; Ashfaque Hasan  Khan

doi:10.1080/1540496X.2015.1011533

What drives the stock market growth? A case of a volatile emerging economy

Mujahid Hussain, Timo Korkeamäki, Danielle Xu, Ashfaque Hasan Khan

Finance, Helsinki

Research output: Contribution to journal › Article › Scientific › peer-review

7 Citations (Scopus)

Abstract

We study the determinants of the explosive stock market growth and increased foreign portfolio investment in Pakistan. Our results indicate that in contrast to evidence from developed markets, the aggregate stock returns are not driven by macroeconomic fundamentals in Pakistan. Moreover, foreign portfolio investors do not tend to react to changes in economic variables in Pakistan. As fundamentals fail to affect stock returns in Pakistan, they may be based more on speculative motives. Our results suggest that in the absence of a strong institutional and regulatory framework, economic policies have only a limited effect on stabilizing an emerging market.

Original language	English
Peer-reviewed scientific journal	Emerging Markets Finance and Trade
Volume	51
Issue number	1
Pages (from-to)	209-223
Number of pages	15
ISSN	1540-496X
DOIs	https://doi.org/10.1080/1540496X.2015.1011533
Publication status	Published - 02.04.2015
MoE publication type	A1 Journal article - refereed

Keywords

512 Business and Management
Emerging markets, foreign portfolio investment, speculative trading, macroeconomic announcements.

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10.1080/1540496X.2015.1011533

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Cite this

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abstract = "We study the determinants of the explosive stock market growth and increased foreign portfolio investment in Pakistan. Our results indicate that in contrast to evidence from developed markets, the aggregate stock returns are not driven by macroeconomic fundamentals in Pakistan. Moreover, foreign portfolio investors do not tend to react to changes in economic variables in Pakistan. As fundamentals fail to affect stock returns in Pakistan, they may be based more on speculative motives. Our results suggest that in the absence of a strong institutional and regulatory framework, economic policies have only a limited effect on stabilizing an emerging market. ",

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