Stock Market Growth and Economic Development in Developing Countries

There exists a debate regarding the importance of stock market on the long run economic growth. Hence, to examine the relationship between the stock market growth and economic development, the sample consisting of fifteen developing countries were analysed. The data relating to twelve years ranging from 2001 to 2012 were analyzed. The stock market growth was measured in terms of size (market capitalization), liquidity (total value of stocks traded and stock turnover ratio) and volume (total number of companies listed in the stock exchange of each of the country). The Economic development was measured in terms of Foreign Direct Investment, Growth, Investment, Consumer Price Index and Gross Domestic Product. The relationship between stock market growth and economic development was explored using Descriptive Analysis and Multiple Regressions Analysis. This paper found positive relationship between stock market growth and economic development in developing countries.