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

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

doi:10.1080/1540496X.2015.1011533

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

Syed Mujahid Hussain^*, Timo Korkeamäki, Danielle Xu, Ashfaque Hasan Khan

^*Corresponding author for this work

Research output: Contribution to journal › Article › 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
Pages (from-to)	209-223
Number of pages	15
Journal	Emerging Markets Finance and Trade
Volume	51
Issue number	1
DOIs	https://doi.org/10.1080/1540496X.2015.1011533
Publication status	Published - 2015
Externally published	Yes

Keywords

Emerging markets
Foreign portfolio investment
Macroeconomic announcements
Speculative
Trading

ASJC Scopus subject areas

Finance
Economics, Econometrics and Finance(all)

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10.1080/1540496X.2015.1011533

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title = "What drives stock market growth? A case of a volatile emerging economy",

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.",

keywords = "Emerging markets, Foreign portfolio investment, Macroeconomic announcements, Speculative, Trading",

author = "Hussain, {Syed Mujahid} and Timo Korkeam{\"a}ki and Danielle Xu and Khan, {Ashfaque Hasan}",

note = "Funding Information: Financial support from the OP-Pohjola Group Research Foundation is gratefully acknowledged. Publisher Copyright: Copyright {\textcopyright} Taylor & Francis Group, LLC.",

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AU - Hussain, Syed Mujahid

AU - Korkeamäki, Timo

AU - Xu, Danielle

AU - Khan, Ashfaque Hasan

PY - 2015

Y1 - 2015

N2 - 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.

AB - 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.

KW - Emerging markets

KW - Foreign portfolio investment

KW - Macroeconomic announcements

KW - Speculative

KW - Trading

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

Abstract

Keywords

ASJC Scopus subject areas

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