Stock exchange

Topics: Stock exchange, Stock market, Economic growth Pages: 9 (1846 words) Published: November 27, 2014
RESEARCH SYNOPSIS/PROPOSAL
Relation between the stock market and GDP
Submitted by:
Muhammad Zeshan
Abstract:

This research will analyze the stock market earnings impact on the GDP growth of a developing country i.e. Pakistan. This study will help to establish a relationship between stock market earnings and economic (GDP) growth of the country, basically it will answer this question, “How the stock market earnings affect the GDP?” In this research, I shall apply the co integration and error correction model to the stock market performance and GDP and shall try to segregate the role of primary from secondary market and find out linkages between secondary market and growth that may impact on GDP of Pakistan. I shall make an effort to find indicators that lead to growth by having stock market earnings at the back.

Table of Contents with List of Tables and/or Illustrations

Serial number
Description
Page numbers
1
Title
i
2
Abstract
ii
3
Table of contents
1
4
Introduction
2
5
Research Question
3
6
Research Objective
3
7
Literature Review
4
8
Significance
5
9
Research Methodology
6
10
Data Collection Sources
6
11
Data Collection Tools
6
12
Hypothesis
6
13
Research Model
7
14
Theoretical Framework
7
15
Type of research
8
16
Sampling technique
8
17
Data processing, analysis and statistical tools
8
18
Reference
9
Theoretical framework Illustration…………………………………….7

Introduction:

GDP is the key indicator of the economic growth of a developing country. This study will find out the linkage between the stock market earnings and GDP growth of Pakistan. Pakistan has struggled in the field of economic progress since inauguration. However in the recent past decade from 1999 to 2008 it was observed that Pakistan has seen the apex of economic progress. During this period the stock exchange out performed, there was an easy access to cash around the country due to low interest rates. Pakistan attracted record foreign direct investments (FDI) and there was no dearth of money involving each segment of society in the business. The major economic indicators of the country including Karachi stock exchange (KSE) touched highest ever closing at 15,676.34 points on 18 April, 2008 (KSE, 2008). The important point of concern here is that KSE was at peak when GDP growth rate is at its peak 8.6 and it linked to overall economic progress, thereafter as the KSE index started declining, the economy as a whole and GDP also declined. Proof to the fact is sky high (double figured) inflation in the country. This trend continues till now. Therefore, the study will help to find the linkages between stock market earnings and GDP, and recommend measures to brighten the stock market earnings to improve the overall economic health of the nation. Therefore it will add to the academic awareness for investment opportunities in Pakistan.

Research Questions / Statement of the Problem

1 Are the changing stock prices positively related to the wealth in economy? 2 Do the stock market earnings and economic growth have some relationship with each other? 3 Do the stock market earnings affect the GDP growth of a country? Is this impact related?

Research Objective

The main objective of this research is to find out the relationship between stock exchange earnings and GDP growth of a nation, resulting in improving economic situation and living standards of an average citizen. To find out whether the economic progress of a country is related to the stock market, or otherwise On the basis of results, give the recommendations for the improvements in the economic situation.

Literature Review:

Stock exchanges play a vital role in the development of a country by speeding up its economic activities. Atje and Jovanovic (1993) study the stock market and economic growth of 40 different countries for the period of 1980-1988 and found a considerable...

References: Bartov, E. (1992), Pattern in Unexpected Earnings as an Explanation for Post Announcement Drift. Accounting Review 67 (3), Pg, 610-211.
Atje, R. and Jovanovic, B. (1993), Stock Markets and Development, European Economic Review, Vol. 37, Pp. 632-640.
Demirgue-Kunt, Asli and Levine, R. (1996), Stock Market Development and Financial Intermediaries: Stylized Facts. World Bank Economic Review 19(2), Pg. 281-322, May.
Levine, R. and Zervos, s. (1996), Stock Market Development and Long-run Growth. Policy Research Working Paper, World Bank, March.
Barlett, B. (2000), Opinion Editorial on the Effect of Stock Market on the Economy, National Centre for Policy Analysis, February 2000.
Henry, P.B. (2000), Do Stock Market Liberalization Cause Investment Booms Journal of Financial Economics, 58, Pp. 301-334.
Irving, J. (2001), Africa‟s Struggling Exchanges-Boost to Economic Development of Costly Irrelevance? Africa Recovery, Abidjan.
Johansen, Soren (1995): Likelihood-based Inference in Co-integrated Vector Autoregressive Models, Oxford University.
Oludoyi, B. (2001), The Existence of post-earnings Announcement Drift on Returns in Nigeria Stock Exchange: Fact or Fiction? Nigeiran Journal of Economic and Social Studies, Vol. 43, No. 1, March 2001.
Sule, Kehinde Oluwatoyin & Momoh Clement Ocheja (2009), the impact of stock market earnings on Nigerian per capita income. African Journal of Accounting, Economics, Finance and Banking Research Vol. 5. No. 5. 2009
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