How stock market impact on economy

HOW STOCK MARKET IMPACT ON ECONOMY Presented to: Mr. omar Presented by: Abrar Abdul Sattar Roll Number: 12 Subject: Portfolio Theories And Investment Analysis MS(Management Science) Department Management ScienceUniversity of Sargodha, Mandi Bahauddin Campus

STOCK MARKET

The stock market is a system through which the company‘s stocks, shares, derivatives and securities are traded.The place where this trading takes place is known as the Stock Exchange.

ECONOMY GROWTH

The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period. Two approaches to measure GDPi. Income approachii. Expenditure approach

RELATIONSHIP BETWEEN STOCK MARKED AND ECONOMY GROWTHDirect and strong relationship between efficient stock market on economic growth. Stock Market factor are positively or negatively effect economy growth.References:i. Muhammad Shahbaz (2008) “Stock Market

Development and Economic Growth”

ii. Jecheche Petros(2005) The effect of the stock exchange on economic growth.

iii. Asterio, D. and S. Price(2007).

Relationship

Direct

Stock Market Economic Growth

STOCK MARKET FACTORS

1. Foreign Direct Investment2. Confidence and Expectation3. Interest rate4. Barometer5. Human Capital

FOREIGN DIRECT INVESTMENT

Foreign direct investment and value traded have positive impact on stock market performance.Foreign direct investment has positive relation with gross domestic product of Pakistan as it is considered as an engine for the economic growth of the country. References: i. Mehwish Zafar 2013ii. Imran Ali (2009)

INTEREST RATEIt is easy to say that interest rate has a negative impact on stock markethigher the interest rate lower the efficiency of stock marketbecause if investors are getting higher without taking any risk then why should they invest in stock marketso for a better economy the ruling state should lower its interest rate so that economy of that country gets developed.References: i. Hamdan Aliii. Groenewold 2003

HUMAN CAPITAL Human capital has positive effect on growth. Human capital and physical capital influence economic growth positively.public and private investment as complimentary and emphasizes on the role of government to improve the efficiency of financial sector of the economy along with its direct role in enhancing human and physical capital in boosting economic growth.size of the market and liquidity prevalent in the market in terms of market capitalization.References:

CONFIDENCE AND EXPECTATION

Investors are always trying to predict the future.A key factor is the mood of investors. If they receive economic news that gives optimism then they are more likely to buy shares.If they receive bad news they will sell.References:

BAROMETERA stock exchange can serve as a barometer of a nation’s fiscal health, broadcasting the ups, downs, trends and shifts that are the benchmarks of a society’s financial infrastructure. So stock market use as a barometer for the government policy for economic growth.References: