Stock Market Size Research Articles

Dissecting the Long-Term Performance of the Chinese Stock Market

The Chinese economy, the largest in the world in PPP terms, has been the fastest growing for the past three decades, and the size of the Chinese stock market is the second largest in the world. Listed firms that contribute to the growth ‘miracle’ and have exceeded expectations should deliver superior long-run returns to investors. During the period 2000-2014, we find that China’s domestic market and its listed firms underperform markets and listed firms from developed and emerging countries, and matched unlisted firms. Chinese firms listed overseas, especially those listed in Hong Kong, perform much better. We examine reasons for the disconnection between economic growth and stock market performance. Problematic IPO and delisting processes exacerbate the adverse selection of firms in the market. With much higher levels of investment compared to listed firms from the US, Japan, India and Brazil, Chinese firms generate lower net cash flows, implying low investment efficiency. Lower cash flows are associated with more related-party transactions, indicating deficiencies in corporate governance.

Does institutional ownership increase stock return volatility? Evidence from Vietnam

The literature on institutional ownership and stock return volatility often ignores small emerging countries. However, this issue is more profound, due to the large size of institutional investors and small stock market size, in emerging equity markets. This paper examines the effects of the institutional ownership on the firm-level volatility of stock returns in Vietnam. Our data cover most of non-financial firms listed on the Ho Chi Minh City stock exchange for the period 2006–2012. Employing different analysis techniques for panel data and controlling for possible endogeneity problems, our empirical results suggest that institutional investors stabilize the stock return volatility. Moreover, we document that: i) the stabilizing effect of institutional investor ownership is higher in dividend paying firms, and ii) if firms are paying out more dividends, this stabilizing effect is greater. Our results outline the important role of institutional investors in maintaining the stability in emerging stock markets.

What Turns Cities into International Financial Centres?

Globalisation and technology continue to fuel worldwide competition among cities for the status of an international financial centre. This study introduces novel data on revenues earned from international finance in 2000-14 by city, and investigates their determinants. It shows that IFCs develop in cities that are leading domestic financial centres, with large, deep, flexible and open labour markets and a large and internationalised non-financial sector, in countries with strong rule of law and contract enforcement. Stock market size and prices, corporate and finance-specific taxation, English as the official language, legal family of origin, and the GMT zone do not matter.

FINANCIAL DEVELOPMENT : A CONTRIBUTING AGENT OF ECONOMIC GROWTH - STUDY OF SELECTED ASIAN COUNTRIES

It has been a self-proclaimed fact that financial development boosts economic growth in the short as well as in the long run. This particular study has taken financial development indicators from banking and secondary market perspectives into consideration. We find the banking sector more prominent and more influential in contrast to secondary markets as by revealed their coefficients. The study adopts financial deepening, foreign direct investment, banking credit to private sector, stock market size, stock market efficiency and stock market liquidity as independent variables along with economic growth as dependent variables. All the variables except banking credit to private sector have a significant and positive relationship with economic growth. Results show that financial development affects economic growth positively. Financial deepening, stock market liquidity and foreign direct investment have only one way causality while stock market size has two-way causality.

What drives the US portfolio investments to the European Union countries?

This study identifies the major determinants of the US portfolio equity and debt investments in the European Union (EU) countries during 1997-2012. It examines whether the EU financial development has promoted the US portfolio investments. The results indicate that the higher stock market development accelerated by the European Monetary Union formation has boosted the portfolio equity flows. The stock market size has the larger positive effect on the equity flows than the stock market liquidity. The results also suggest that the higher bank development has decreased the portfolio investments. More bank credit flows have diminished the equity and debt flows. Finally, the results confirm that the financial crisis has not weakened the stock market development effect on the portfolio investments. The stock market liquidity has continued to be the main investment driver during the crisis period 2008-2012. The EU countries are still considered as the safe destinations for the US portfolio investments given their better macroeconomic fundamentals and institutions to better insulate themselves from crisis.

On the issue of currency internationalisation - South Korean won

With the increase in trading volume and market volatility in the global currency markets for the past decade, the Korean foreign exchange market has been experiencing significant fluctuations, adding to the instability of the overall financial market. A major contributing factor behind the volatile value of won, Korea's currency, is the government regulation that prohibits won–denominated fund transfers between non–residents, thus preventing an offshore won market from developing. This paper proposes that offshore won trades be permitted as a first step towards the internationalisation of won. Given the size of Korea's economy, stock market, and competiveness and scale of the non–financial industrial sectors, further liberalisation measures of the Korean financial market including permitting an offshore won market will contribute to a more liquid and stable currency market, and thus the overall stability of the financial market.

Stock exchanges sustainability support assessment

Financial markets can play a role in sustaiability development. They can support sustainability by making ESG disclosure, launching sustainability related indices or offering sustainability guidance for listing companies. All of these activities helps in developing sustainability. This article is an attempt to analyze sustainability support level in stock exchanges in the world. It is based on a survey conducted in 27 stock exchanges. The aim of this article is to assess the level of stock exchanges sustainability support and examine the relationship between the stock market size and sustainability support level. To acheve the aim the assessment tool has been created. Sustainability Support Index is a synthetic stock markets sustainability support measure. It helps to compare stock exchange sustainability support levels. In the article statistical tools are used to compare the phenomena, mainly regression analysis and Pearson’s correlation. The conclusion presented in the article states that there is a differential stock market sustainability support level in the world. There is no clear correlation between sustainability support variables and stock market size variables.

Exploring Development of Financial Derivative in Pakistan

Karachi Stock Exchange (KSE) shows a better growth rate in perspective of financial derivatives but KSE also faces high degree of volatility. Now days, KSE is considered highest volatile market in derivative all over the world. Main user of derivatives is Telecom Sector, transportation Sector, Banking Sector, financial institution and power sector in Pakistan during 2007-2012. If we use such derivative for purely hedging purpose such instrument are very helpful but excessive speculation on such instrument lead the market toward volatility which hampers not only the market but also the derivative prospective. Better policy in this concern not only will increase the size of stock market but also will provide the depth of market, tax advantage, investor confidence and business growth Statutory restriction on different institution also hinder the pace of derivative progress in Pakistan like mutual fund only may use only 10% of assets in derivatives. Fragile economy is also major problem which hinder the true spirit of derivatives in recent era. There are many factors which increase need of derivative day by day i.e. Financial ease, limited access to sources of funds and multi-national business emergence. It should also be noted that many crises are owing to high investment in derivative like East Asia crises 1990 and 2005 in Pakistan.

Stock Market Development and Economic Growth: Evidence from India, Pakistan, China, Malaysia and Singapore

Stock market is the only source through which we can come to know about the volume of interest showed by investors by buying and selling the shares of listed companies. This paper is written to empirically show the GLS regression analysis based on panel data (1991-2011) that unto how significantly economic growth is influenced by stock markets. The econometric models are made by considering GDP per capita as dependent variable and stock markets’ variables, FDI, Investments, EXP and GDS as explanatory variables. The models are made to study by taking stock market size and liquidity separately and then collectively. Results show that GDP per capita is significantly explained by independent variables.

Cross-sectional predictability of stock returns, evidence from the 19th century Brussels Stock Exchange (1873–1914)

We use pre-World War I Brussels Stock Exchange (BSE) data to investigate the relation between average stock returns and market beta, size, momentum, dividend yield and total risk on the cross-section of stock returns. Based on portfolio sorts and Fama–MacBeth regressions, we find no relationship between market beta, size or total risk and average returns. Momentum is strongly present in the entire data set as well as in subsamples based on size. We also find evidence for a weak value effect as measured by dividend yield. The flat relation between market beta and average return may be due to leverage-constrained investors.

The performance of Libyan stock market

The objective of this paper is to answer the following question:. To what extent Libyan stock market developed to contribute to economic growth in Libya? This can be evaluated by using many financial indicators, these include stock market size, activity and efficiency, as well as the study including the regulatory framework, and information technology (IT) set in place by the market authorities. However, descriptive and comparative method was used. The results indicated that, despite the modest progress made in a very short time regarding all indicators which the paper calculated, however, it can be said that Libyan stock market remain largely underdeveloped, small and relatively inefficient. Its market capitalization to GDP is very low and investors have no access to long-term capital. In addition, the market still have very low liquidity and investors still have a limited choice of financial instruments and face liquidity problems. In the end of this paper was its conclusion a set of recommendations that can be used in developing a program that aims to speed the development of Libyan stock market and increase its efficiency.

Compliance with IFRS 3- and IAS 36-required disclosures across 17 European countries: company- and country-level determinants

In this study, we analyse compliance for a large sample of European companies mandatorily applying International Financial Reporting Standards (IFRS). Focusing on disclosures required by IFRS 3 Business Combinations and International Accounting Standard 36 Impairment of Assets, we find substantial non-compliance. Compliance levels are determined jointly by company- and country-level variables, indicating that accounting traditions and other country-specific factors continue to play a role despite the use of common reporting standards under IFRS. At the company level, we identify the importance of goodwill positions, prior experience with IFRS, type of auditor, the existence of audit committees, the issuance of equity shares or bonds in the reporting period or in the subsequent period, ownership structure and the financial services industry as influential factors. At the country level, the strength of the enforcement system and the size of the national stock market are associated with compliance. Both factors not only directly influence compliance but also moderate and mediate some company-level factors. Finally, national culture in the form of the strength of national traditions (‘conservation’) also influences compliance, in combination with company-level factors.

Stock Market Development and Economic Growth in Nigeria: Market Size Versus Liquidity

This study investigates empirically into the acclaimed positive role played by stock markets in driving growth, with evidence from the Nigerian stock market. Utilizing several econometric techniques, such as unit root test, cointegration test and Gran=ger causality test the study disaggregates stock market development into two components: Stock market size and stock market liquidity. The essence is to know the aspect of stock market development that is the main driver of growth in Nigeria. The findings suggest the dominance of stock market liquidity over market size. While there is a two way causation between stock market liquidity and economic growth with the strength of the causality coming more from stock market liquidity, market size is found to have little or no effect on growth. Equally the results suggest a one way causation between financial deepening and growth with causality flowing from financial depending to economic growth. Key words: Stock market size; Liquidity; Economic growth; Causality; Nigeria

Has the Euro Boosted Equity Markets in the Euro Area?

This paper analyses the impact of the Euro on the development of equity markets in the Euro area and compares the results with those of the United States, UK, and Japan. Specifically, using data on 11 EMU countries from 1990-2010, we examine the impact of the Euro on different measures of stock market size, market liquidity, and concentration. It then uses a variety of ARFIMA and GARCH models to test whether the volatility returns have decreased following the introduction of the Euro. We found that the Euro enhances the depth and the liquidity in Euro area equity markets and that concentration and t he unconditional volatility of returns have significantly increased in most Euro area equity markets. Furthermore, a lthough our results identify the United States, Italy, Greece, and Euronext as the fastest growing markets on aggregate, it identifies Ireland and Germany as the lowest growing markets when information on market size, liquidity measures, volatility, and concentration measures Keywords: Liquidity, Concentration, ARFIMA and GARCH. JEL G11.C22.C01

The Role of Stock Market Development on Economic Growth in Nigeria: A Time Series Analysis

This study investigated the role of stock market development on economic growth of Nigeria using a 15-year time series data from 1994 - 2008. The method of analysis used is Ordinary Least Square (OLS) techniques. The study measures the relationship between stock market development indices and economic growth. The stock market capitalization ratio was used as a proxy for market size while value traded ratio and turnover ratio were used as proxy for market liquidity. The results show that market capitalization and value traded ratios have a very weak negative correlation with economic growth while turnover ratio has a very strong positive correlation with economic growth. Also, stock market capitalization has a strong positive correlation with stock turnover ratio. This result implies that liquidity has propensity to spur economic growth in Nigeria and that market capitalization influences market liquidity. We should view with caution the notion that stock market size is not significant for economic growth since multicollinearity exists in the data used for this analysis. The government should make policies that boost the interest of domestic investors in Nigeria as this might spur investors’ interest and boost stock market activity.Keywords: Stock Market Development, Economic Growth, Time Series Analysis, Nigeria, Market capitalisation, liquidity.

Foreign Direct Investment vs. Foreign Portfolio Investment

We examine the effect of a country’s governance environment on the foreign investment it attracts. We classify countries based on the dominant mode of governance into three types: (1) rule-based (strong public rule of law), (2) relation-based (weak rule of law and strong informal networks), and (3) family-based (absence of both public rules and informal networks). We then examine how different governance types affect foreign investment patterns among 45 countries. Our main argument is that the choice of investment—direct or portfolio—is influenced by the type of property protection associated with different governance modes. We find that rule-based countries attract the lowest amount of FDI relative to the total amount of foreign investment, and they have the largest stock market size relative to their economies. Our study contributes to the foreign investment literature by bringing the governance environment into the equation and more successfully explaining why some countries have relatively large foreign direct investment ratios and relatively small foreign portfolio investment ratios.

The Role of Stock Market Development on Economic Growth in Nigeria: A Time Series Analysis

This study investigated the role of stock market development on economicgrowth of Nigeria using a 15-year time series data from 1994-2008. Themethod of analysis used is Ordinary Least Square (OLS) techniques. Thestudy measures the relationship between stock market development indicesand economic growth. The stock market capitalization ratio was used as aproxy for market size while value traded ratio and turnover ratio were usedas proxy for market liquidity. The results show that market capitalization andvalue traded ratios have a very weak negative correlation with economicgrowth while turnover ratio has a very strong positive correlation witheconomic growth. Also, stock market capitalization has a strong positivecorrelation with stock turnover ratio. This result implies that liquidity haspropensity to spur economic growth in Nigeria and that market capitalization influences market liquidity. We should view with caution the notion that stock market size is not significant for economic growth since multicollinearity exists in the data used for this analysis. The government should make policies that boost the interest of domestic investors in Nigeria as this might spur investors’ interest and boost stock market activity.

Does stock market development always improve firm-level financing? Evidence from Tunisia

The question of whether or not increased stock market size allows for improved financing conditions for firms in emerging markets is an important one for policy-making. This paper seeks to investigate this issue by analyzing whether increases in market-level liquidity have indeed trickled down to individual firms over the last decade of stock market development in Tunisia, a fast-growing Mediterranean emerging market. We develop time varying liquidity scores for all firms listed in the Tunisian market over the 1997–2009 period and analyze the extent to which market development, firm-level characteristics and risk exposure affect the magnitude and the distribution of liquidity using a set of fixed effect panel regressions. Our results suggest that massive increases in value traded have created market congestion, thereby increasing the costs of trading, in a context of persistently low efficiency and increased international integration. The main implications of this process are (i) market-level development and international integration are not sufficient conditions to ease access to finance for local firms, (ii) further reforms in the Tunisian market should focus on diversifying corporate ownership and improving the disclosure of information, and (iii) international investors seeking diversification in Tunisia should be aware of a significant illiquidity risk.

The Impact of Stock Market Performance Indices on Nigeria Economic Growth and Development 1980-2009: A Case Study of United Bank for Africa

This study specifically examines the impact of stock market performance on economic growth and development in Nigeria, and on stock price of United Bank for Africa plc. The study used time serial data for 30 year period: 1980–2009, using secondary data only to fill this important research gap. The Ordinary Least Square regression was used to estimate the various models. The real gross domestic (RGDP) was adopted as the dependent variable for first model and the average share price of UBA (ASP) as the dependent variable for the second model; the independent variables include market capitalization ratio (MCR), total value of transaction traded ratio (VTR), and turnover ratio (TR), while controlling for other variables that may introduce bias in our results. The first regression result showed that stock market size and turnover ratios are positive in explaining economic growth, while stock market liquidity co-efficient was negative but significant in explaining long-run growth in Nigeria. Also, the second regression result shows that there is positive and significant relationship between the explanatory variable market capitalization ratio (MCR) and the dependent variable ASP, but the relationship between the Value of transaction traded ratio (VTR) and the dependent variable ASP is negative and not statistically significant, likewise, the relationship between turnover ratio (TR) and average share price of UBA is positive but not significant.

Privatization and Financial Market Development in Emerging Countries: A Comparative Study

This paper examines the impact of privatization on stock market size and liquidity in a multinational sample of 31 emerging markets. We find that the intensity of privatization and the use of privatization offerings on the stock market contribute to enhance stock market development (market capitalization and value traded), but the documented effects vary across geographical regions, owing to the specificities of the divestiture process. We use GMM procedure in order to estimate dynamic panel specifications and find that privatization appears to be the most beneficial in the Asian sub sample where most favourable conditions were put in place before privatization actually started. In other regions however, similar positive outcomes are yet to materialize. We derive several policy implications from our results.