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.
|Peer-reviewed scientific journal||Emerging Markets Finance and Trade|
|Number of pages||15|
|Publication status||Published - 02.04.2015|
|MoE publication type||A1 Journal article - refereed|
- 512 Business and Management
- Emerging markets, foreign portfolio investment, speculative trading, macroeconomic announcements.