Economic Growth, Stock Market Performance, Economic Growth Uncertainty and Foreign Participation in Local Equity Market: A Cross-Sectional Examination of 63 Countries

19 Pages Posted: 13 May 2014 Last revised: 4 Feb 2015

See all articles by Vichet Sum

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

An Wang

Bates White Economic Consulting

Date Written: May 12, 2014

Abstract

This study investigates the joint explanation and impact of economic growth, equity market performance and economic growth uncertainty on foreign participation (using net inflows from equity securities held by foreign investors as a proxy) in local equity market. Based on the analysis of cross-sectional data of all 63 countries including developed, emerging and frontier markets, the results show equity market return, economic growth, economic growth uncertainty have no impact on foreign participation in local equity market. However, by looking at the cross-sectional data of only emerging markets, the results indicate economic growth, equity market return and economic growth uncertainty jointly explain about 67.13% of the variation in foreign participation in local equity market across 17 emerging markets. Higher growth and higher stock market return are associated with greater foreign participation in local equity market in emerging markets.

Keywords: economic growth, GDP growth rate, GDP growth uncertainty, stock market performance, foreign stock market investment

JEL Classification: N10, G10, G11, G15

Suggested Citation

Sum, Vichet and Wang, An, Economic Growth, Stock Market Performance, Economic Growth Uncertainty and Foreign Participation in Local Equity Market: A Cross-Sectional Examination of 63 Countries (May 12, 2014). Available at SSRN: https://ssrn.com/abstract=2436194 or http://dx.doi.org/10.2139/ssrn.2436194

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

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HOME PAGE: http://vichetsum.com

An Wang

Bates White Economic Consulting

1300 Eye Street NW
Suite 600
Washington, DC 20005
United States

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