Causative Factors of Downturn in Growth and Performance of Stock Markets in Pakistan

Abstract

In any economy, the stock market plays an important role by mobilizing domestic resources and channeling them toward productive investment. This implies that it has a significant relationship with the economy. The stock market has been a great source to earn profit not only for companies but also for the individuals. The present research examines the relationship between stock markets and the factors that affect the growth and performance of the capital markets. The research has concluded that political instability and uncertainty, terrorism and inadequate government policies highly influence the performance of stock markets, causing volatility in the economy. Besides, these
factors keep foreign investors to stay away or withdraw their investments from stock markets. However, the sustainable political stability, long term government policies, strict vigilance by the market regulators, tight security measures, effective counterterrorism tools and techniques and collective wisdom can help to resolve the forgoing issues and assist country's stock markets to grow beyond expectations.