Stock market development

The complexity-entropy causality plane has been recently introduced as a powerful tool for discriminating Gaussian from non-Gaussian process and different degrees of correlations [O.A. Rosso, H.A. Larrondo, M.T. Martín, A. Plastino, M.A. Fuentes, Distinguishing noise from chaos, Phys. Rev. Lett. 99 (2007) 154102]. We propose to use this representation space to distinguish the stage of stock market development. Our empirical results demonstrate that this statistical physics approach is useful, allowing a more refined classification of stock market dynamics. (M. Zanin), [email protected] (B.M. Tabak), [email protected] (D.G. Pérez), [email protected] (O.A. Rosso).

Since the 1990s economists have devoted considerable attention to the study of the relationship between financial markets development and economic growth. In particular, the emergence of stock markets with economic development is an intriguing and interesting aspect of such a relationship, and yet relatively unexplored. This paper examines the most recent findings in the theoretical and empirical literature trying to determine the rationale behind the development of stock markets along the path of growth and the nature of the interrelationship between real and financial variables.

The purpose of this paper is twofold: First, to explore the macroeconomic and institutional factors influencing stock market development (SMD) in Fiji during the period 1996-2018 and second, to explore the causes of the prolonged sluggish nature of the South Pacific Stock Exchange (SPX) in Fiji. A mixed-method approach was employed: autoregressive distributed lag (ARDL) testing framework was used to estimate the influence of the structural determinants in Fiji while descriptive and narrative analysis was used to explain the status of the SPX. The study findings partially confirmed the findings of previous studies. The findings that economic growth promotes SMD while inflation is negatively correlated to SMD were consistent with previous findings. However, the finding that regulatory quality and banking sector development have negative impacts on SMD was contrary to the findings of previous studies. Many determinants, which have been shown to have significant impact on SMD in other studies, did not show any significant impact on the SPX in the Fijian context, particularly the stock market liquidity showed no correlation to SMD and not distributed normally. Exploration of the nexus of the market liquidity reveals that present regulatory conditions are not conducive for the stock market to be vibrant and suggests eliminating excessive paperwork and entry restrictions are critical, not only to attract new players to the market but also to increase trading volumes. We argue that the concentration of ownership and market disintegration resulted in the current sluggish status of the SPX. K E Y W O R D S determinants, Fiji, financial liberalisation, market integration, nexus of stock market liquidity, stock market development

In this paper, we examine the influence of bank regulation, concentration, and financial and institutional development on commercial bank margins and profitability across a broad selection of Middle East and North Africa (MENA) countries. The empirical results suggest that bank-specific characteristics, in particular bank capitalization and credit risk, have a positive and significant impact on banks' net interest margin, cost efficiency, and profitability. Also we find that macroeconomic and financial development indicators have no significant impact on net interest margins, except for inflation. Regulatory and institutional variables seem to have an impact on bank performance.

In this paper, we examine the influence of bank regulations, concentration, financial and institutional development on commercial bank margin and profitability across a broad menu of Middle East and North Africa (MENA) countries. We cover the 1989-2005 period and control for a wide array of macroeconomic,, financial and bank characteristics.

show that these factors also drive the degree with which determinants of the growing migration of stock market capital raising, listing, and trading have been migrating to activity to international financial centers. They use a international financial centers. As fundamentals improve sample of 77 countries and document that higher and technology advances, this migration will likely economic growth and more macroeconomic stability increase and domestic stock market activity may become help stock market development. Countries with higher too little to support local markets. For many emerging income per capita, sounder macroeconomic policies, economies, the best policy is to establish sound more efficient legal systems, better shareholder fundamentals but not necessarily the trading, or even protection, and more open financial markets tend to listing of securities locally. have larger and more liquid stock markets. The authors

The study examines the relationship between the development of the stock market and economic growth in Malaysia using annual data from 1982 to 2014. The development of the stock market represented three indicators, namely the turnover ratio, the shares value traded ratio and the market capitalization ratio. Augmented Dickey-Fuller stationarity test was carried out prior to the use of a bound test approach for co-integration and causality testing. The findings of the co-integration analysis showed that there is evidence of a long-run relationship between economic growth and the development of the stock market. Further examination of the causal relationship showed proof of the shortrun interaction between economic growth and the development of the stock market. These findings may be of importance to policymakers in formulating growth policy and financial decision-making by investors.

This paper attempts to empirically investigate the link between stock market development and firms' capital structure, an often overlooked relationship in finance theory, for the case of 38 firms listed on the stock exchange of Mauritius (SEM) for the period 1994-2005. Results from the panel estimates suggest that further development of the market has been associated with debt financing for

This paper examined the long run and short run interactions between stock prices and exchange rate in Nigeria based on a sample from 1 st February, 2001 to 31 st December, 2008. Three models were derived from the sample, albeit pre-crisis, crisis and basic models. The paper set out by testing the time series properties of the series using the ADF and PP tests. In addition, the Engle and Granger two-step and Johansen and Juselius cointegration procedures were applied. Empirical results showed that all the series are I(1) and evidence of cointegration was established using the Johansen and Juselius methodology. Furthermore, causality tests revealed strong evidence of long run bidirectional relationship between stock prices and exchange rate in the models. Policy wise, the findings implied that monetary authorities in Nigeria are not constrained to take into account stock market development in achieving their exchange rate policy objective given the symbiotic nature of relationship between the two. The paper recommends measures that would promote greater stability and efficiency of the Nigeria's foreign exchange market.

In this paper we introduce two new quantifiers for the stock market inefficiency: the number of forbidden patterns and the normalized permutation entropy. They are model-independent measures, thus they have more general applicability. We find robust evidence that degree of market inefficiency is positively correlated with the number of forbidden patterns and negatively correlated with the permutation entropy. Our empirical results suggest that these two physical tools are useful to discriminate the stage of stock market development and can be easily implemented. PACS: 89.65.Gh (Economics; econophysics, financial markets, business and management), 05.45.Tp (Time series analysis), 89.75.Da (Systems obeying scaling laws), 89.20.-a (Interdisciplinary applications of physics) (Massimiliano Zanin), [email protected] (Benjamin M. Tabak), [email protected] (Darío G. Pérez), [email protected] (Osvaldo A. Rosso).

This paper investigates the impact of stock market development on real economic growth in Nigeria. The Johansen Cointegration and vector error correction model (VECM) were used to analyze annual time series data on stock market development indicators and real gross domestic product (GDP) from 1984 to 2018. The results show a long run relationship between stock market development and economic growth in Nigeria. In the long run, market capitalization ratio, all share index and rediscount rate have significant positive effect on GDP, whereas market turnover ratio, and trade openness have strong negative influence on GDP. Results also show evidence of causality effects running from stock market development to real GDP. The paper concludes that stock market development is important for economic growth in Nigeria. The paper recommends that government promote stable economic and political environment, strengthen the regulation and supervision of the stock market, streamline market processes, improve trading system, and increase investment in manufacturing and logistics infrastructure.

The present paper investigates the relationship between the development of the Ivorian stock market and the country's economic performance. Stock market development indicators were identified and used to calculate the Ivorian stock market development index. A set of control variables were also identified. The empirical results suggest that gross domestic product and stock market development are cointegrated when the control variables are included in the analysis. That is, there is a long-run relationship between these variables taken together. Moreover, there is a unidirectional causality running from stock market development to economic growth. Résumé: Le présent papier analyse la relation entre le développement de la Bourse des Valeurs d'Abidjan, BVA (Côte d'Ivoire) et la performancé economique du pays. Des indicateurs du développement des marchés boursiers ontété identifiés et utilisés pour développer un indice de développement de la BVA. Un ensemble de variables de contrôle aété aussi identifié. Les résultats empiriques suggèrent que le PIB (mesure de la performancé economique) et l'indice de développement de la BVA sont cointégrés. Ainsi, il y a une dynamique de long terme entre le développement du marché boursier, la croissanceéconomique et les variables de contrôle pris ensemble. En outre, il y a une causalité uni-directionnelle allant du développement du marché boursier vers la croissanceéconomique.

The goal of our study is evaluation and determination of effective factors on stock market development of Iran. In previous studies, the effectiveness of two groups of factors (macroeconomic and
institutional)  has  been  examined  by  panel  data method. However,  in  this  paper  the  effect  of macroeconomic  factors  are analyzed using  time  series  and  traditional  econometrics  (OLS) models. Income,  saving,  investment  rate,  financial  intermediary  development,  stock market  liquidity  and
macroeconomic instability are important factors that are evaluated. In addition, results of this study are compared with a  similar  study  that performed on Middle-Eastern and North Africa  (MENA) countries. At the end, some suggestions are proposed to develop the stock market in Iran.

This paper examined the long run and short run interactions between stock prices and exchange rate in Nigeria based on a sample from 1 st February, 2001 to 31 st December, 2008. Three models were derived from the sample, albeit pre-crisis, crisis and basic models. The paper set out by testing the time series properties of the series using the ADF and PP tests. In addition, the Engle and Granger two-step and Johansen and Juselius cointegration procedures were applied. Empirical results showed that all the series are I(1) and evidence of cointegration was established using the Johansen and Juselius methodology. Furthermore, causality tests revealed strong evidence of long run bidirectional relationship between stock prices and exchange rate in the models. Policy wise, the findings implied that monetary authorities in Nigeria are not constrained to take into account stock market development in achieving their exchange rate policy objective given the symbiotic nature of relationship between the two. The paper recommends measures that would promote greater stability and efficiency of the Nigeria's foreign exchange market.

Why do some countries have growth-enhancing financial systems, while others do not? Why have some countries developed the necessary investor protection laws and contract-enforcement mechanisms to support financial institutions and markets, while others have not? This paper reviews existing research on the role of legal institutions in shaping financial development.

Transition economies face a fundamental dilemma. They need to develop financial markets, and yet they lack the ingredients it takes to do so. Recipes for legal governance mechanisms that have worked elsewhere, including reactive law enforcement by courts and proactive law enforcement by regulators, may not help in the short to medium term. Using evidence from stock market development in China and Russia, this paper suggests that at least in the short term, administrative governance may be a viable alternative to legal governance in emerging stock markets.

This paper examines the empirical association between stock market development and economic growth for a period of ten years around the Indian market "liberalization" event. We find no support for the hypothesis that the Indian stock market development is associated with the economic growth in that country during the entire event study period of 1981 to 2001. We find support for relevance of stock market to econmic development during the pre-liberalization sub-period. We also find a negative correlation between stock market development and economic growth for the post- liberalization period. We offer a number of hypotheses consistent with the inverse relationship between growth and stock market development in the post-liberalization period. In particular, our results are consistent with the suggestion that the Indian Stock market is a casino for the sub-period of post liberalization and for the entire ten-year event study period.

Using multivariate cointegration and Innovation Accounting Methods, this paper examines the impact of Foreign Direct Investment (FDI) on stock market development in Ghana. The paper finds long-run relationship between FDI and stock market development in Ghana. Using impulse responses and Variance Decomposition from Vector Error Correction Model we find that increase in FDI significantly influence the development of stock market in Ghana JEL classification codes: C50, F20, G20

The main purpose of this study was to explore the causal link between stock market development and economic growth in Zimbabwe using annual time series data for the period 1980 to 2008. The study evaluated the nature of the relationship between stock market development and economic growth in Zimbabwe. The stock market development was measured using two variables namely stock market size as measured by stock market capitalization as a ratio of GDP and stock market turnover as measured by the value of stocks traded as a ratio of stock market capitalisation. The study utilised advanced econometric techniques of Unit Root Tests, Vector Autoregressive (VAR) and Granger Causality Tests to explore the relationships. The empirical results showed a uni-directional causal link that runs from stock market development to economic growth and there is evidence of an indirect transmission mechanism through the effect of stock market development on investment.

the provision of data. The authors thank Jan Annaert, Marc De Ceuster, Avner Greif, Laura Veldkamp, and Hans Willems and the participants of the University of Antwerp (UFSIA) economics seminar for comments. We also thank Steven Cappoen of the National Bank of Belgium for data on credit institutions. All remaining errors are our own. 1 This paper investigates the long-term relationship between financial market development and economic development in Belgium. We use a new data set of stock market development indicators to argue that financial market development substantially affected economic growth. We find strong evidence that stock market development caused economic growth in Belgium, es-pecially in the period between 1873 and 1935. Institutional changes affecting the stock exchange explain the time-varying nature of the link between stock market development and economic growth. 2 1

This paper attempts to empirically investigate the link between stock market development and firms' capital structure, an often overlooked relationship in finance theory, for the case of 38 firms listed on the stock exchange of Mauritius (SEM) for the period 1994-2005. Results from the panel estimates suggest that further development of the market has been associated with debt financing for

We study how local stock market development and internationalization-listing, trading, and capital raising in international exchanges-are related to economic fundamentals. Using panel data, we find that higher-income economies with sounder macro policies, more efficient legal systems, greater openness, and higher growth opportunities have more developed local markets. Importantly, these fundamentals also relate to internationalization, and actually more so, since the better the fundamentals, the higher the ratio of internationalization to local market activity. Furthermore, we find that greater domestic stock market development is associated with subsequent higher internationalization. These findings are not consistent with firms internationalizing to escape poor domestic environments, but rather with better country fundamentals allowing firms to internationalize and with countries with more developed stock markets experiencing more internationalization. With liquidity agglomeration, better fundamentals might further accelerate internationalization, with potential negative effects on domestic markets, as others have already argued.

This paper investigates the linkages between financial development and economic growth in the Middle East using newly developed methods of panel cointegration along with the popular time series methodologies such as the Johansen's cointegration, Granger causality, and the variance decompositions. The results indicate that, in the long run financial development and economic growth may be related to some level. In the short run, the panel causality tests point to real economic growth as the force that drives changes in financial development while individual countries' causality tests fail to give a clear evidence of the direction of causations.

In the past two decades, both developed and developing countries have deregulated their banking and financial systems with the aim of improving the efficiency, productivity and profitability of the sectors and increasing international competitiveness. This study attempts to examine the effect of institutional and financial variables on the banking industry performance of selected Middle Eastern and North African (MENA) countries. Evaluating bank efficiency in a non-parametric setting (Data Envelopment Analysis, DEA), we then employ a second-stage Tobit regression to investigate the impact of regulatory variables on banks' efficiency. The first stage indicates that Morocco and Tunisia have more efficient banking systems compared to the other selected MENA countries, although banks in Jordan seem to catch up with best practice from 2003 onwards. The Tobit regressions show a robust association of some environmental measures with cost efficiency. In this context, our results reveal that higher bank efficiency in our sample is influenced by the quality of the legal system, well capitalized and liquid banks. We also find that banking sector development measured by credit to private sector by banks in low regulated environments-like the one in our sample countries-tends to reduce bank efficiency. However, the impact of stock market development is positive and significant in all specification confirming the complementary role of bank and capital market. Besides, a highly concentrated banking sector in our sample reduces significantly the efficiency of banks. Finally, efficiency is improving in our sample thanks to the financial reforms variables not accounted for in our control variables and Egyptian banks display the lowest efficiency in the region for the entire sample period.

Over the last decades, many countries have implemented significant reforms to foster domestic capital market development. These reforms included stock market liberalization, privatization programs, and the establishment of regulatory and supervisory frameworks. Despite the intense reform efforts, the performance of capital markets in several countries has been disappointing. To study whether reforms have had the intended effects on capital markets, we analyze the impact of six capital market reforms on domestic stock market development and internationalization, using event studies. We find that reforms tend to be followed by significant increases in domestic market capitalization, trading, and capital raising. Reforms are also followed by an increase in the share of activity in international equity markets, with potential negative spillover effects on domestic markets. JEL classification codes: G15, G18, G20

Using a panel data set for 35 developing countries over the period , this study analyzes the role of financial sector development in economic growth and domestic and foreign capital accumulation. A major finding of the study is that financial sector development affects per capita GDP mainly through its role in efficient resource allocation, rather than its effects on capital accumulation. Furthermore, it is the domestic rather than foreign capital accumulation that is instrumental in increasing per worker output and hence promoting economic growth in the long run. Furthermore, foreign capital also does not stimulate domestic capital accumulation, while domestic capital plays a significant role as a complementary factor for attracting foreign capital.

In this paper we use Spanish stock market data to identify the bull and bear phases of the market and to analyze its characteristics during the period 1941-2002. We compare these characteristics with those of the US and of two other European countries (Germany and the UK). Our sample is divided in two subperiods in order to account for differences

The purpose of this study was to evaluate the impact of Nigerian Stock Exchange on the development of the economy. The quasi-experimental research design was adopted on collecting data for the study. While data was sourced from publications of the Nigeria Stock Exchange and the Central Bank of Nigeria, multiple regression analysis was used as the method of data analysis. The study revealed among other things; that Nigerian Stock Exchange contributes positively to the growth and development of the economy. Based on the foregoing, the following recommendations were put forward; the Nigeria stock exchange should educate the public on the use of capital market as a means of investment through seminars, radio and television broadcast and the benefit of investing through the stock market. Further, the trade alert system recently introduced should be strengthened to prevent the public from fraudulent practices by participants.

This paper studies the relationship between the development of contractual savings (assets of pension funds and life insurance companies) and capital markets. The focus is on the macroeconomic and financial effects of contractual savings' development. New theoretical ideas and empirical results are presented. At the theoretical level, we explain how the growth of the contractual savings sector promotes financial development and economic growth through different channels. We argue that among institutional investors, contractual savings institutions are the most effective at developing capital markets. What is different about contractual savings is that their liabilities are long-term and illiquid assets in asset holders' portfolios. At the empirical level, we analyze Granger causality between contractual savings and both market capitalization and value traded in stock markets for some OECD and other countries. The evidence suggests that the growth of contractual savings cause the development of capital markets.