Stock Markets, Banks and Economic Growth: Some Evidence on the Role of Stock Price Informativeness

Cheng, Fang Chin; Gul, Ferdinand A.

doi:10.2139/ssrn.1917328

Cited by 3 publications

(1 citation statement)

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“…They confirmed that both stock market liquidity and banking development positively and strongly link with both current and future rates of economic growth, capital accumulation, and productivity growth based on finance-led growth hypothesis. Fang-Chin Cheng (2011) extended the economic growth model tested by (Levine & Zervos, 1998) by including a measure for capital allocation efficiency proxied by stock price in formativeness based on 59 countries. It is observed that stock price informativeness is positively and strongly correlated with the economic growth of both emerging and developed economies.…”

Section: Introductionmentioning

confidence: 99%

Stock Market - Economic Growth Nexuses: Evidence from Asian Stock Markets

Wickramasinghe,

Deyshappriya,

Gunarathne

2023

S. Asian J. Finance

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Purpose: The main purpose of this study is to examine the relationship between stock market development and economic growth in Asian countries focusing on causality direction.Methodology: The study based top 10 stock exchanges in the Asian region and the secondary data mainly collected from World Development Indicators of the World Bank over the period of 1990-2020. Generalized Method of Moment (GMM) Dynamic Panel analysis along with panel unit root and cointegration tests were employed to accomplish the objectives of the study.Findings: The cointegration test emphasizes the existence of long-term relationship between stock market development and economic growth while the GMM dynamic panel analysis confirms the positive relationship between stock market development and economic growth of top 10 stock exchanges in the Asian Region. Moreover, reverse causality which runs from economic growth to stock market development has also been confirmed by the GMM dynamic panel analysis. Consequently, bi-directional causality between stock market development and economic growth exists in the top 10 Asian stock exchanges confirming both Finance-Led Growth Hypothesis and Growth-Led Finance Hypothesis. Hence, stock market and growth-oriented policies are recommended to be implemented to optimize the mutual benefits.Originality: One of the key significances of the study is that the study has constructed a composite index to measure stock market development rather than rely on conventional measures.

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Section: Introductionmentioning

confidence: 99%

Stock Market - Economic Growth Nexuses: Evidence from Asian Stock Markets

Wickramasinghe,

Deyshappriya,

Gunarathne

2023

S. Asian J. Finance

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The impact of stock market manipulation on Nigeria’s economic performance

Akinmade

Adedoyin

Bekun

2020

Economic Structures

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A typical stock market is characterized by the trading of equity securities such as shares which represent ownership in a particular corporation (Cheng and Gul 2010). Big corporations often issue these securities with a promise of good returns in the form of dividends, subject to satisfactory performance of the issuing organization. Frank and Goyal (2007) argued that the present performance of a company or an expectation of good performance has a direct impact on the share price. It is also a common claim among researchers that the economic climate of corporations is one huge factor that causes fluctuations in investors' sentiment and ultimately induces share price behaviour. Every appreciation of share price is, therefore, an indication of potential gains for investors. When stock exchanges make decent trading facilities available to market participants, it facilitates smooth trading of listed equity securities (Gao and Kling 2006). Expectedly, a well-developed stock exchange increases savings by ensuring the availability of diverse

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ARDL Inference for Some Macroeconomic Variables on Nigerian Stock Prices

David,

Nnamdi,

Bamigbala

2024

WSB Journal of Business and Finance

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This study presents inferences about the effect of quarterly returns of some macroeconomic variables on Nigerian stock prices (NSP) by means of the autoregressive distributed lag (ARDL) model. Four models were studied using NSP, inflation rate (IFR), broad money supply (BMS), and exchange rate (EXR) data that spanned from 1999 to 2021. The rolling correlation was first carried out to test the significance of signals between each input variable and NSP. In testing for co-integration existence and to account for short- and long-term relationships between the study variables, the ARDL bounds test and error correction model (EMC) were utilized, respectively. Also, in determining the stability of the estimated parameters, the recursive cumulative sum (RCUSUM), RCUSUM of squares, and recursive moving sum (RMOSUM) charts were applied. The first model results revealed that at 5% IFR, it has no influence on NSP, both in the long run and short run. However, the second model revealed that BMS has a significant positive effect, both in the long run and short run, on NSP. The third model results showed that the EXR effect on NSP is not significant at 5% in the long run, but in the short run, it significantly negatively affects NSP in the second and third lags. Results from the fourth model revealed that IFR at lag one and BMS are positive and significant in influencing NSP in the long run. In contrast, EXR has a significant negative influence on NSP in the short run, but BMS has a positive and significant effect on NSP in the short run at 5%. The RCUSUM, RCSUMS, and RMOSUM charts revealed that the estimated parameters for the respective models are stable. The study concludes that NSP is influenced negatively by EXR and positively by IFR and BMS. The study recommends that the monetary policy rate should be controlled to lower the cost of borrowings, enhance liquidity levels in the stock market, and develop policies that can have a combined positive impact on stock prices.

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Stock Markets, Banks and Economic Growth: Some Evidence on the Role of Stock Price Informativeness

Cited by 3 publications

References 64 publications

Stock Market - Economic Growth Nexuses: Evidence from Asian Stock Markets

Stock Market - Economic Growth Nexuses: Evidence from Asian Stock Markets

The impact of stock market manipulation on Nigeria’s economic performance

ARDL Inference for Some Macroeconomic Variables on Nigerian Stock Prices

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