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
Date Written: May 12, 2014
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
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