Determinants for the Growth of Stock Market

Abstract

The stock market growth is interlinked with the economic growth and it is one of the most important pillar of the economy. The objective of this study is to examine the important determinants for the growth of stock market. The literature review suggests that many variables affect the growth of the stock market; some of them influence positively and some negatively. Therefore, four variables i.e. Size of the stock market, liquidity in the market, Foreign Investors’ Portfolio Investment (FIPI) and Discount Rate (DR) have been focused in this where size of the market is dependent variable and remaining three are independent variables. Market capitalization (MC) is taken as proxy of size of the market wherein liquidity in the market is measured by the market volume (MV). The results of regression analysis depicted the two variables i.e. FIPI and MV are the significant variables and are contributing positively towards the growth of the stock market, whereas DR is an insignificant variable. Therefore, it is concluded that the FIPI and MV are the most important factors for the growth of the stock market.