Dubai Stock Market Development and its Effect on Economic Growth

Abstract

Understanding the financial market is very important to capture the economic policies and development of any country. Stock markets are essential as it helps companies raise capital for investment (Bose, 2001). It lists the company’s expectations about profitability from its current prices. Now, since profitability is linked to economic activity, therefore, the activities in the stock market plays a very important role in analyzing the economic growth and direction of economy. Since the 1987 stock market crash, several studies have been conducted to understand the volatility of the market (Woertz, 2006). The measure of risk is very important in the financial market and it is required by portfolio managers and investors. Financial institutions and regulators also require knowledge about the stock markets so that they can understand the market risks. Since the second global financial crisis of 2008, global stock markets faced a lot of trouble and the Dubai financial market also had to face the music. Since the real estate bubble, the government of Dubai was burdened with $59 billion on liabilities and its total debt reached $80 billion within a few weeks (Oxford, 2008). The importance of the financial market in the economic growth policies of any country has never been more emphasized. With the financial crisis subsiding over the past year, the Dubai stock market once again tries to establish itself. This paper tries to analyze the impact of the Dubai stock market on its economic growth and the various factors that has played a role in development of the economy.