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You dont own stocks. Stocks own you.TONY BALIS
Significant AssociationsThe relationship between Stock market index
and economic growth has always received
much attention in the discipline of Finance
Over a period of time, it has been observed
that the economic growth indicators and the
stock market index of a nation move in asimilar direction
Moreover, the compounded annual growth
rate of the US GDP closely aligns with the
same of Standard and Poors 500 Index
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Never invest in any idea you can't illustrate with
a crayon.PETER LYNCH
Persistent ArgumentThe argument is whether Stock market
development causes economic growth or it is a
consequence of augmented economic
activities
To test the association, Granger Causality test
has been run on the following variables -Standard and Poors (S & Ps) 500 Index
Index for Industrial Production in US
Quarterly data has been used for the period
1950-2010
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When buying shares, ask yourself, would you buy the whole
company?RENE RIVKIN
Economic impacts of a Stock MarketWealth Effect: When stock markets rise, the
investors become wealthy and are willing to
spend more
Effect on Pensions: If share prices fall too
much, pension funds can struggle to meet
their promises
Investor Confidence: Bad headlines of falling
share prices are another factor which
discourage investors from spending
Firms Investment: Plummeting stock pricesmakes it much more difficult for firms to raise
finance on the stock market
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ConclusionThe empirical evidence strongly supports that
greater stock market development and liquidity
enhances or at least precedes economic growth
More liquid stock markets and enhanced risk
sharing also aids in the undertaking of longer
tenure investments with better returns
Stock markets should become much more
robust and effectual so that the cost of capital
or equity risk premium could be brought down
You can never predict when that unknown torpedo will come
out of the dark and smash the price of a stock.RALPH SEGER
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We simply attempt to be fearful when others are greedy and to
be greedy only when others are fearful.WARREN BUFFETT
Supporting ResearchesLevine and Zervos presented a paper at the
World Bank called Capital Control
Liberalization and Stock Market developmentin 1995
The results of the paper clearly exhibited that
stock market liquidity rose significantly in
twelve out of the fourteen nations that
liberalized controls on international capital
flows
For instance, Chile liberalized constraints on
the repatriation of dividends by foreign
investors in January, 1988
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RecommendationsRegulatory, accounting and legal systems
should be designed to ease the process with
which stockholders trade the securities
The proposed accounting practice of IFRS
should be implemented as it will make easier
for Indian companies to raise cheaper funds
overseas
Full capital account convertibility should be
permitted to enhance the stock market liquidity
I hate weekends because there is no stock market.RENE RIVKIN
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Research Paper used for Reference
Easiest way to earn money in stock Market. Ask a layman to
trade, Sell whatever he buys, Buy whatever he sells.HRISHIKESH SENGUPTA
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Other References for the Project
The economy depends about as much on economists as the
weather does on weather forecasters.JEAN-PAUL KAUFFMANN
(n.d.). Retrieved from
http://astonjournals.com/manuscripts/Vol2010/BEJ-1_Vol2010.pdf
ECONOMICS HELP. (n.d.). Retrieved fromhttp://www.economicshelp.org/blog/stock-market/how-does-the-
stock-market-effect-the-economy/
Google. (n.d.). Retrieved from www.google.com/publicdata
IMF. (n.d.). Retrieved from
http://www.imf.org/external/pubs/ft/fandd/1996/03/pdf/levine.p
dfSamy BEN NACEUR, S. G. (n.d.). Does Stock Market Liberalization
Spur Economic and Financial Development in the MENA Region?
Retrieved from
https://netfiles.uiuc.edu/skarimi2/www/MEEA/Paper%20by%20Be
n%20Naceur,%20Ghazouani,%20and%20Omran.pdf
Stock Markets: A spur to the Economic Growth. (n.d.). Retrievedfrom http://actrav.itcilo.org/actrav-
english/telearn/global/ilo/equity/fdstock.htm
Yahoo Finance. (n.d.). Retrieved from http://finance.yahoo.com/
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Goodness is the only investment that never fails.
HENRY DAVID THOREAU
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EXHIBIT-1
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EXHIBIT-2First Variable: S & P 500 Index
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EXHIBIT-3Second Variable: IIP Index (A proxy for
economic growth)
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Granger Causality Results with
different lag values
EXHIBIT-4
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EXHIBIT-5Granger Causality Results with
different lag values (*Continued)
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EXHIBIT-6
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Regression Output
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EXHIBIT-7
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The table also indicates that
easing international capital flow
constraints may increase liquidity,but it may also increase volatility
But volatility should not be of
much concern as it does not put
any reckonable impact on thelong-term growth
Thus, if policymakers have the
perseverance to withstand some
short-run volatility, liberalizationoffers expanded prospects for
long-run economic growth