Stock Market Development Research Articles

The moderating effects of environmental and regulatory quality on financial development to promote sustainable FDI inflows in Canada

Stimulating sustainable FDI through the connection of financial development and its moderating relationships with environmental quality and regulatory quality emerges as a crucial agenda nowadays. This study investigates into this relationship using quarterly data from 1990Q1 to 2022Q4 for Canada; employing ARDL bound tests, Granger Causality, and FM-OLS econometric models. Foreign direct investment is the dependent variable of this study. The findings confirm significant long-run relationships among financial development, stock market development, and the moderating effects of environmental and regulatory quality on FDI inflows in the Canadian economy. Conversely, in the short run, financial development, stock market development, and economic growth exhibit bidirectional causal links with FDI, while environmental quality, regulatory quality, and trade openness demonstrate unidirectional causal links with FDI. The error correction mechanism indicates that all variables quickly return to equilibrium except trade openness. Robustness checks further confirm that all the variables have fully modified co-integrating relationship with FDI inflows including the moderating effects of environmental and regulatory quality which is the innovation in the FDI-Growth existing literature. Thus, policymakers are urged to prioritize environmental quality and regulatory quality, alongside other significant explanatory variables identified in this study to promote sustainable FDI inflows.

Stock Market Development and Economic Growth: The Case of Kazakhstan

The purpose of the article. The relationship between economic growth and financial development has long been widely discussed in scientific circles. Most empirical research has led to the clear conclusion that financial markets stimulate economic development. However, in the case of financial markets in developing countries, this conclusion is not so obvious. The aim of this study is to empirically verify the relationship between economic growth and the development of the stock market (Kazakhstan Stock Exchange). Methodology. Empirical verification of the strength and shape of the cause-and-effect relationship between real GDP growth and independent predictors will be carried out using classic linear regression models with many independent variables. Results of the research. The results of empirical verification of the strength and shape of the cause-and-effect relationship between the growth of real GDP and independent predictors indicate that the development of the stock market has a positive impact on the growth of the country's real GDP but is not the basic factor of Kazakhstan's economic growth.

Factors Affecting Traditional and Modern Services Imports in an Emerging Economy: The Role of Real Exchange Rate and Remittances Inflows

This study examines the effects of real exchange rate and remittance inflows on total, traditional and modern services imports in India using the autoregressive distributed lag (ARDL) bound testing approach from 1990 to 2020. Banking sector development, stock market development and net foreign direct investment inflows are controlled variables in the estimated services imports functions. The findings from the ARDL long-run model indicate that real exchange rate and remittance inflows inversely affect all service imports. Banking sector development and stock market development positively impact total and traditional services imports. In the case of modern services imports, the banking sector (stock market) inversely (positively) affects it. Net foreign direct investment inflows positively (negatively) affect modern services imports (traditional and total services imports). These findings suggest that policymakers in India should check the adverse effects of real effective exchange rates and remittance inflows on total, traditional and modern services imports. JEL Codes: F14, F31, F24, G21, G10, C32

Stock Market Development and Environmental Sustainability in Saudi Arabia: Asymmetry Analysis

Stock Market Development (SMD) can have positive or negative environmental effects by providing the capital to clean or dirty production processes, respectively. The present study investigates the effect of SMD on CO2 emissions in Saudi Arabia from 1985 to 2022 by conducting symmetrical and asymmetrical analyses. The results validate the environmental Kuznets curve in both symmetrical and asymmetrical analyses. The turning point of the curve is found at 61500 SR and 49944 of income per capita in symmetrical and asymmetrical analyses, respectively, in the long run. The turning points are found at 65895 SR and 54979 SR in the symmetrical and asymmetrical models, respectively, in the short run. All points are within the range of sample period’s income. Thus, Saudi economic growth has no environmental problems. Moreover, SMD and increasing SMD help reduce CO2 emissions in the long run with elasticity parameters 0.8548 and 0.9854 in symmetrical and asymmetrical models, respectively. Thus, SMD should further be focused to have pleasant environmental effects in Saudi Arabia.

Institutional, macroeconomic and firm-specific determinants of financial leverage: the case of Vietnam

PurposeThis study aims to investigate the institutional, macroeconomic and firm-specific determinants of financial leverage in Vietnam and provides new evidence from the dynamic panel fractional estimator.Design/methodology/approachThis study uses a panel dataset of 859 Vietnamese firms from 2008 to 2022 and employs three estimators: Feasible Generalized Least Squares (FGLS), System Generalized Method of Moments (SysGMM) and Dynamic Panel Fractional (DPF), with DPF being particularly suitable for handling fractional dependent variables and the dynamic nature of financial leverage.FindingsThe results confirm the dynamic nature of the financial leverage model, with firm-specific factors, institutional factors and macroeconomic factors playing significant roles in shaping firms' financing decisions. The DPF estimator highlights the positive impact of stock market development on leverage. This study contributes to the literature by providing new evidence on the determinants of leverage in Vietnam, using the DPF estimator for more accurate estimation and revealing the significant impact of the size of the banking sector, the size of the stock market, the stock market development index, the financial development index and the corruption perception index on leverage.Originality/valueThis study contributes to the literature by providing new evidence on the dynamic nature of the financial leverage model and the impact of institutional, macroeconomic and firm-specific factors on financial leverage in the context of Vietnam. The use of the DPF estimator allows for a more accurate and reliable estimation of the determinants of leverage, considering the fractional nature of the dependent variable and the persistence of capital structure decisions over time.

Exploring the stock market development and sustainable development nexus: insights from emerging market economies

PurposeSustainable development is considered a key factor in addressing environmental issues, global inequalities and poverty. This study aims to investigate the impact of stock market indicators on sustainable development across 16 emerging markets from 2003 to 2020.Design/methodology/approachThe research uses causality and cointegration analyses to explore the relationships between stock market indicators and sustainable development.FindingsUnivariate causality analysis reveals a bidirectional causal relationship between the stock market turnover ratio and sustainable development, as well as a unidirectional relationship from sustainable development to stock market capitalization and total value traded. Panel-level cointegration analysis suggests that only stock market capitalization has a weak positive influence on sustainable development. However, the impact of stock market indicators on sustainable development varies significantly among countries, as revealed by country-level cointegration analysis.Research limitations/implicationsWhile this study provides valuable insights, it is not without limitations. The findings are limited to the selected emerging markets and the specified timeframe (2003–2020). The complexity of factors influencing sustainable development suggests the need for further exploration in diverse contexts.Practical implicationsUnderstanding the nuanced relationships between stock market indicators and sustainable development can offer valuable insights for policymakers, investors and stakeholders.Originality/valueThis research contributes to the existing literature by examining the multifaceted connections between stock market indicators and sustainable development, focusing on country-specific causality relationships. The study highlights the reciprocal nature of this relationship, where financial market development can both influence and be influenced by a country's progress toward sustainability. This approach provides a more nuanced understanding of the complex interaction between stock market maturity and sustainability goals.

Effect of Stock Market Development on Economic Growth in Peru

This paper aims to investigate the relationship, behavior, and relevance that the main variables of the Peruvian capital market have with the economic growth of Peru in the period 2015 - 2018, for which statistical series and the application of the methodology of a dynamic model have been used in order to validate the hypotheses and answer the problem posed. The results obtained, with each in monthly periods, showed that between Gross Domestic Product (GDP) and the variables of negotiable amounts and stock market capitalization there is a positive relationship during the period 2015 - 2018. However, these variables explain the variation of GDP in a smaller proportion.

Stock Returns And Inflation In Fiji

The relationship between stock returns and inflation has important implications for monetary policy and stock market investment and has attracted growing attention from scholars over recent years. Despite this, the empirical evidence so far has been inconclusive. The main objective of this paper is to investigate the impact of inflation on stock returns in the developing stock market of Fiji. We examine the impact of inflation on stock market returns within the GARCH and EGARCH modelling framework using monthly data from 2000:02 to 2018:06 and find that inflation negatively affects stock market returns. Our results indicate the importance of ensuring price stability and suggest that stock market investment will not help hedge against inflation in Fiji. The results suggest that Fiji’s stock market is likely to react more negatively to inflation in response to countercyclical monetary policy and emphasize the significance of portfolio diversification.

Applicaition and Evaluation of the Value Investing Approach

In tandem with China's economic expansion, there has been a notable rise in per capita disposable income, fostering an influx of individual investors into the securities market. This surge is underpinned by improved transaction mechanisms, with individuals now comprising the primary market participants. However, challenges persist as investment discipline wanes amidst a backdrop of heightened randomness and exorbitant high-frequency operation fees. Consequently, the development of China's secondary stock market remains nascent, fraught with uncertainties, and prone to frequent instances of frustrated investments. The burgeoning popularity of Warren Buffett's value investment theory signals a paradigm shift, with investors increasingly gravitating towards identifying undervalued stocks for sustained returns. Nonetheless, ordinary retail investors grapple with a dearth of investment knowledge, compounded by the intricacies of different industries, thus impeding their ability to effectively apply professional analysis methods. To bridge this gap, this paper endeavours to synthesize prevailing empirical analysis methods commonly employed across diverse industries. Through a comprehensive literature review and reference analysis, it seeks to provide insights aimed at enriching investors' comprehension and application of value investment principles. By elucidating practical approaches, this research contributes to the broader discourse on investment value, fostering a more nuanced understanding within the context of China's evolving securities market landscape.

Economic growth and stock market development: Evidence from some selected countries

By sustaining the required capital and investment, the financial sector plays a critical role in achieving economic growth and stability. This paper conducts a comprehensive examination of the relationships between stock market development and economic growth in 11 post-socialist countries and China. Unbalanced panel data from selected countries from 1995 to 2020 were used for this study. We wanted to disclose the cointegration of crucial variables in assessing Granger causalities using the Vector Auto-Regressive (VAR) model. Our findings confirm the Neutrality Hypothesis (NLH) when we investigated the existence of an independent association between Economic Growth (EG) and the Composite Index of Stock Market Development (SMD). The study's recommendations emphasize the significance of changing economic policies to account for disparities in economic growth and stock market development to ensure sustainable development in the selected countries.

Testing the unit root of social, environmental, and governance stock price indexes using a multivariate ARDL model

ABSTRACT The establishment of a green stock market (GSM) has significant implications for the advancement of sustainable development. However, it is susceptible to fluctuations caused by fluctuations in fossil fuel prices, economic policy and geopolitical uncertainties, and monetary policy. This study evaluates the persistence of shocks to five social, environmental, and governance (ESG) stock price indexes using the novel multivariate ARDL unit root test. The Federal Fund Effective Rate (FFER) and West Texas Intermediate Crude Oil Price (WTIOIL) were separately included as covariates in the ARDL model and tested for the null hypothesis of a unit root using a multivariate ARDL unit root test. The results of this study indicate that the ESG stock price indexes exhibit unit root behaviour, suggesting that policy shifts and shocks have a lasting impact on the dynamics of the green stock market and sustainable development.

Does Investors’ Online Public Opinion Divergence Increase the Trading Volume? Evidence from the CSI 300 Index Constituents

We collected online public opinions on the CSI 300 index constituents and investigated the different impacts of online public opinion divergence on trading volume. Here, we find that online public opinions are helpful in improving the trading volume, but the online public opinion divergence of investors reduces the expected trading volume. In particular, non-financial and mid-cap stocks with high levels of discussion are more significantly influenced by online public opinion divergence. Through the classification of investors’ influence levels, we find that the divergence among high-level investors increases the trading volume, while the divergence among low-level investors exacerbates the decrease in trading volume. A reduction in divergence for both levels will have a greater impact. We believe that attention should be paid to regulating and guiding the online public opinions of “newcomers”. This will not only improve the quality of Guba but also contribute to the steady development of the Chinese stock market.

The Determinants of Stock Market Development in Nepal

This research investigates the determinants of stock market development in Nepal from 2003 to 2022 using a quantitative approach. Utilizing time series data, the study employs Pearson correlation and Ordinary Least Square (OLS) methods to analyze the relationship between macroeconomic variables, including income level, banking sector development, gross domestic savings, macroeconomic stability, private capital flows and stock market liquidity and stock market development, specifically market capitalization. The results indicate that banking sector development and private capital flows significantly influence stock market development, suggesting a crucial role for financial institutions and foreign investment in shaping and fostering the growth of Nepal's stock market. However, no significant relationship has been found between income level, gross domestic savings, macroeconomic stability, stock market liquidity, and stock market development. These findings help to design policies to stabilize or stimulate the stock market in Nepal.

Examining the long-run relationship between stock market development and Nigerian economic growth

Purpose This paper aims to examine the long-run relationship between stock market development and Nigerian economic growth from 1980 to 2020. Design/methodology/approach Market capitalization, number of listed companies, total value traded ratio and turnover ratio are used. An autoregressive distributed lag model is used for the analysis. Findings The market capitalization ratio and turnover ratio have positively significant links with economic growth. The number of listed companies has a negative and non-significant impact on economic growth. Total value traded ratio has a negatively significant link with economic growth in the short run. The positive but insignificant relationship between traded value ratio and turnover ratio in the long run growth means that the Nigerian stock market is growth inducing and on the right track as stock market liquidity drives growth. Research limitations/implications The government and Security Exchange Commission should increase the market liquidity level by improving the trading infrastructure. The government and regulatory authorities should improve and effectively implement the existing policies that would ensure stock market growth. This facilitates the investors’ speed to purchase and sell shares. The Securities and Exchange Commission should reduce transaction costs to encourage active trading activities. The market should be diversified with investment instruments such as derivatives, futures and swap options which would limit the adverse effect of listed companies in the market. To increase the stock market liquidity, the Security and Exchange Commission should apply moral suasion to bring private companies that have met certain financial thresholds to convert to public companies. Government should improve on the legislation to encourage more private companies to list on the stock exchange. Originality/value The study findings add value in that stock market development has a positive impact on economic growth in Nigeria.

The Impact of Firm-level Characteristics on Stock Abnormal Returns amid Crises in Egypt versus the United States

This paper conducts a comparative analysis on the variability of firm-level abnormal returns in Egypt and the United States (US) amidst three different recent global hazardous events (political, economic, and health). Moreover, it determines the impact of firm-level characteristics in reducing firms’ abnormal returns and identifies the most vulnerable industries during crises in both countries. The paper methodology is conducted in two stages on the selected sample for US and Egypt stock markets, DJIA and EGX30 indices, respectively. The first stage is an event study approach to determine the amplitude and direction of the response of the US and Egypt abnormal returns to each of the studied crises. The second stage encompasses cross-sectional regressions to study the impact of firm-level characteristics and vulnerable industries on the highest significant abnormal stock returns for each event in each country. This study has theoretical and practical contributions. To our knowledge, this is the first study to demonstrate the higher abnormal stock returns of the developing stock market, Egypt, compared to the developed stock market, US, in both health and economic crises under all different time intervals except the examined political crisis. Moreover, emerging and developed countries’ businesses should provide attentive management of this study’s significant firm-level characteristics to strengthen firms’ exogenous shock absorbency. Furthermore, this study’s identification of the most vulnerable industries in each market paves the way for developing supportive policies for these industries resulting in healthier and safer financial markets amidst crises. Keywords: Abnormal Returns, Stock Markets, Crises, Egypt, United States

The Moderating Role of Institutional Quality in the Relationship between Foreign Capital Inflows and Stock Market Development: A Panel Data Analysis

The study examines the impact of foreign capital inflows (FCI) on stock market development (SMD), with a specific focus on the moderating role of institutional quality (IQ). The study uses a panel dataset of 28 emerging economies for the period of 1998 to 2022. The findings reveal that both international remittances (REM) and foreign portfolio investment (FPI) have a significant positive impact on SMD. These findings imply that REM inflows enhance the availability of financial resources in the economy, promoting stock market growth and stability. Similarly, FPI increases market liquidity and fills the saving-investment gap in the host country, thereby increasing SMD. However, the results show that foreign direct investment (FDI) has a significant negative impact on SMD. This finding implies that FDI could negatively affect SMD in the host country due to the diversion of investments from the stock market to other business ventures, profit repatriation, and crowding-out effects on domestic investment by creating strong competition in the input market, making it difficult for listed domestic firms to operate. Moreover, the study reveals two unique and interesting findings. First, official development assistance (ODA) has a significant negative impact on SMD, suggesting that ODA reduces SMD due to the misallocation of resources due to aid conditions and economic instability, and the crowding-out effect on private investments. Second, IQ positively moderates the relationship between all forms of FCI and SMD in the sampled countries, implying that host countries with a good institutional framework and high IQ tend to experience high SMD.

The combine impact of stock market, international investment and clean energy consumption on ecological footprint in emerging countries

Purpose Emerging nations strive to diminish their ecological impact to meet net-zero targets, yet encounter formidable hurdles in curbing their environmental footprint. This purpose necessitated the study into impact of stock market, renewable energy and international investment on the ecological footprint in emerging countries from 1990 to 2020. Design/methodology/approach The study used augmented mean group (AMG) estimator, cointegration and heterogenous panel causality approach. Findings Results from the AMG show that renewable energy consumption reduces environmental pollution in most countries except Mexico. The study disclosed that stock market capitalization decreases ecological footprint in emerging countries. Using both the Kao and Pedroni cointegration methods, the study affirms the existence of stable equilibrium relationship in the long term. The causality test concluded a bidirectional relationship between stock market and ecological footprint and a unidirectional link between international investment, clean energy and ecological footprint. Research limitations/implications The research is limited to only emerging countries. Therefore, future research should examine the environmental impacts of renewable energy consumption in different countries and regions, taking into account the local environmental conditions, policies and practices. This would help to identify the best practices and standards for minimizing the ecological footprint of renewable energy technologies and maximizing their benefits for environmental sustainability. Practical implications The study found that stock market capitalization reduces ecological footprint in Brazil, China, Turkey and India. To foster a culture of sustainability in stock market development impact, academic policies should emphasize the integration of environmental education across disciplines. By promoting awareness of the ecological consequences of stock market activities, societies can cultivate a mindset that values responsible economic practices. This, in turn, can lead to informed decision-making at individual and institutional levels. Social implications First, since the study found that clean energy reduces ecological footprint, advocating for utilization of clean energy sources could be a key priority in emerging countries. Governments should incentivize the development and adoption of renewable energy technologies, such as wind and solar power, by providing subsidies and tax benefits. Furthermore, increasing awareness among residents about the benefits of clean energy and promoting its utilization in both residential and commercial environments can expedite the transition to a more environmentally friendly energy combination. Originality/value First, it pioneers an exploration into the interplay between stock market capitalization, international investment, clean energy and ecological footprint in emerging countries. Secondary unlike, unlike prior research, this study uses methodologies that account for cross-sectional dependencies and a unique characteristic specific to each country. In addition, by using common correlated effects mean group, AMG, cointegration and causality procedures, this study distinctly isolates and analyzes empirical findings for each country, leading to policy-oriented outcomes.

Reform of Stock Market Activity in Ukraine

The article examines in detail measures to improve stock market activity in Ukraine, their prerequisites, and consequences. Currently, exchange trading takes place exclusively in the electronic system. The activities of the exchanges are aimed at administering the electronic trading system to ensure its functioning. The mechanisms for carrying out exchange trades have been unified, and the procedure for conducting trades, accreditation, monitoring the execution of contracts, and sanctioning violators has been improved, making it impossible to engage in shadow deals or hide sums to avoid taxes. The exchange acts as a guarantor of the execution of transactions. These measures should contribute to the transparency and formalization of economic transactions, increasing their reliability. Additionally, these improvements are expected to enhance investor confidence, attracting both domestic and international investments. By reducing the opportunities for fraudulent activities and tax evasion, the Ukrainian stock market can achieve greater stability and credibility. Furthermore, the standardization and modernization of trading procedures can streamline operations, making the market more efficient and accessible. This, in turn, could lead to increased market participation and liquidity, fostering a more vibrant and dynamic financial environment. Overall, these reforms are crucial for the sustainable development of Ukraine's stock market and its integration into the global financial system.

Does economic policy uncertainty and stock market development affect natural resources: Evidence from United States of America

AbstractThis study investigates the impact of economic policy uncertainty (EPU) and stock market development (SMD) on natural resources in the United States during the period between 1985 and 2021 by keeping the GDP and innovation as control variables. For empirical analysis, the autoregressive distributed lag model (ARDL) and Kernel Regularized Least Squares (KRLS) regression techniques were used to investigate the long‐ and short‐run relationships. To check the robustness of results, this study uses a machine learning approach, i.e., Canonical Cointegrating Regression (CCR). The results of the ARDL bounds test approach suggest the presence of long‐run relationships among the study variables, and these results were confirmed through KRLS and CCR. The long‐run results indicate that economic policy uncertainty and SMD increase natural resource rent. Moreover, GDP and innovation also increase natural resource rent. However, a weak relationship exists between innovation and natural resource rent in the short run. Policymakers need to provide stable and encouraging economic policies to promote sustainable resource management, while stock markets need to facilitate long‐term planning and responsible investment in natural resource industries.

Examining the impact of the stock market development on Economic growth- KSA Tadawul.

The relationship between stock market development and economic growth has been a subject of debate, with arguments centered on the impact of a well-functioning stock market on economic growth. This study argues that economic growth is influenced by stock market development and economic reform indicators, while controlling for other determinants of growth. The research employs a comprehensive theoretical framework linking stock market development to economic growth, and it specifically focuses on the Tadawul stock market in Saudi Arabia. The empirical analysis, using sophisticated panel data econometric techniques, reveals a significant positive correlation between Tadawul stock market and economic growth, particularly in the oil sector. This suggests that the Tadawul stock market plays a crucial role in influencing and contributing to economic growth, especially within the context of the oil industry.