SOCIOECONOMIC FACTORS OF STOCK MARKET DEVELOPMENT: ROLE OF TERTIARY EDUCATION

Authors

  • Md. Thasinul ABEDIN University of Chittagong
  • Kanon Kumar SEN Bangladesh University of Professionals
  • Mohammad Rifat RAHMAN University of Chittagong
  • Sharmin AKTER Jashore University of Science and Technology

DOI:

https://doi.org/10.35774/jee2020.02.224

Keywords:

Stock Market Development, Banking Sector Development, Tertiary Level of Education.

Abstract

Considering economic growth and banking sector development as economic factors and tertiary level of education as a social factor, this paper explores their effect on stock market development in Bangladesh during the period 1976 to 2015. This paper reveals a significant positive impact of banking sector development and economic growth and an insignificant positive impact of tertiary level of education on stock market development both in the short-run and in the long-run. The positive long-run effect of socioeconomic factors on stock market development suggests that over time the rise in tertiary education, economic growth, and banking sector development contributes into the stock market development. Hence, government should give special attention into the development of tertiary education in addition to accelerating economic growth and banking sector development to ensure broad base stock market.

JEL: C01, C02, C32.

Author Biographies

Md. Thasinul ABEDIN, University of Chittagong

Thasinul, Assistant Professor, Department of Accounting

Kanon Kumar SEN, Bangladesh University of Professionals

Department of Accounting and Information Systems

Mohammad Rifat RAHMAN, University of Chittagong

Lecturer, Department of Banking and Insurance

Sharmin AKTER, Jashore University of Science and Technology

Lecturer, Department of Accounting and Information Systems

References

Andrews, D. (1993). Tests for Parameter Instability and Structural Change with Unknown Change Point: A Corrigendum. Econometrica, Vol. 61, No. 4, pp. 821-856. https://doi.org/10.2307/2951764

Andrews, D. (2003). Tests for Parameter Instability and Structural Change with Unknown Change Point: A Corrigendum. Econometrica, Vol. 71, No. 1, pp. 395-397. https://doi.org/10.1111/1468-0262.00405

Banerji, A., Lin, H., Saksonovs, S. (2015). Youth Unemployment in Advanced Europe: Okun's Law and Beyond. IMF Working Paper, WP/15/5, January: International Monetary Fund (IMF). https://doi.org/10.5089/9781498382519.001

Bayar, Y. (2016). Macroeconomic Determinants of Stock Market Development: Evidence from Borsa Istanbul. Financial studies, Vol. 1, pp. 70 -89.

Beck, T., Levine R. (2001). Stock Markets, Banks and Growth: Correlation or Causality. The World Bank: Washington. https://doi.org/10.3386/w9082

Borensztein, E., De Gregorio, J., Lee J.W. (1998). How does FDI affect economic growth? Journal of International Economics, Vol. 45, No. 1, pp. 115-135. https://doi.org/10.1016/S0022-1996(97)00033-0

Boyd, Levine, R., Smith, B. D. (2001). The impact of inflation on financial sector performance. Journal of Monetary Economics, Vol. 47, No. 2, pp. 221-248. https://doi.org/10.1016/S0304-3932(01)00049-6

Calderon-Rossell, J. R. (1991). The Determinants of Stock Markets Growth.In S. Ghon Rhee and Rosita P. Chang (Eds.), Pacific Basin Capital Markets. Paper presented in Research Proceedings of the Second Annual PacificBasin Finance Conference, Vol. II, Bangkok, Thailand, 4-6 June 1990. Amsterdam: North-Holland.

Cherif, M., Gazdar, K. (2010). Macroeconomic and Institutional Determinants of Stock Market Development in MENA Region New Results from a Panel Data Analysis. International Journal of Banking and Finance, Vol. 7, No. 1, pp. 139-159. https://doi.org/10.32890/ijbf2010.7.1.8403

Chow, G. C. (1960). Tests of equality between sets of coefficients in two linear regressions. Econometrica, Vol. 28, pp. 591-605. https://doi.org/10.2307/1910133

Demirguc-Kunt, A., Levine, R. (1996). Stock Market Development and Financial Intermediaries: Stylized Facts. The World Bank Economic Review, Vol. 10, No. 2, pp. 291-321. https://doi.org/10.1093/wber/10.2.291

Dolado, J. H., Lutkepohl (1996). Making Wald Tests work for Cointegrated VAR Systems. Econometric Review, Vol. 15, pp. 369-386. https://doi.org/10.1080/07474939608800362

El-Wassal, K. A. (2005). Understanding the Growth in Emerging Stock Markets. Journal of Emerging Market Finance, Vol. 4, No. 3, pp. 227-261. https://doi.org/10.1177/097265270500400302

Garcia, V., Liu, L. (1999). Macroeconomic Determinants of Stock Market Development. Journal of Applied Economics, Vol. 2, No. 1, pp. 29-59. https://doi.org/10.1080/15140326.1999.12040532

Ho, S.Y. (2017). The Macroeconomic Determinants of Stock Market Development: Evidence from South Africa. MPRA Paper, No. 76493. University of South Africa, South Africa.

Hossain, M.S., Kamal K.M.M. (2010). Does stock market development cause economic growth? A time series analysis for Bangladesh economy. Paper Presented in International Conference on Applied Economics-ICOAE-2010.

LankaBangla Financial Portal (2015). BSEC moves to introduce financial literacy service. Dated on 31 August 2015. Retrieved from: http://lankabd.com/dse/stock-market/news/BSEC-moves-to-introduce-%27financial-literacy%27-service?storyId=34033.

Law, S. H., Habibullah, M.S. (2009). The Determinants of Financial Development Institutions, Openness and Financial Liberalisation. South African Journal of Economics, Vol. 77, No. 1, pp. 45-57. https://doi.org/10.1111/j.1813-6982.2009.01201.x

Levine, R., Zervous, Z. (1998). Stock Markets, Banks, and Economic Growth. The American Economic Review, Vol. 88, pp. 537-558. https://doi.org/10.1596/1813-9450-1690

Mankiw, Gregory Nicholas (1994). Macroeconomics, Worth Publishers, New York.

Marth, S. (2015). How strong is the correlation between unemployment and growth really? The persistence of Okun's Law and how to weaken it. The WWWforEurope Policy Paper, Policy paper no. 23.

Miazee, H., Shareef, A.N.M., Hasan N. (2014). Fundamentals Knowledge of Investor and Its Influence on Investment in Capital Market - A Study fromDhaka Stock Exchange. Research Journal of Finance and Accounting, Vol. 5, No. 24, pp. 192-204.

Naceur, S. B., Ghazouani, S., Omran M. (2007). The Determinants of Stock Market Development in the Middle-Eastern and North African Region. Managerial Finance, Vol. 33, No. 7, pp. 477-489. https://doi.org/10.1108/03074350710753753

Narayan, P. K. (2004a). Do public investments crowd out private investments? Fresh evidence from Fiji. Journal of Policy Modelling, Vol. 26, pp. 747-53. https://doi.org/10.1016/j.jpolmod.2004.06.002

Narayan, P. K. (2004b). Reformulating critical values for the bounds Fstatistics approach to cointegration: an application to the tourism demand model for Fiji. Discussion Papers N0.02/04, Department of Economics, Melbourne: Monash University.

Narayan, P. K. (2005). The saving and investment nexus for China: Evidence from cointegration tests. Applied Economics, Vol. 37, No. 17, pp.1979-1990. https://doi.org/10.1080/00036840500278103

Okun, A. M. (1962). Potential GNP: Its Measurement and Significance. Proceedings of the Business and Economics Statistics Section, American Statistical Association, pp. 98-104.

Pesaran, M. Hashem, Pesaran, B. (1997). Microfit 4.0. Oxford University Press, Oxford.

Pesaran, M. Hashem, Shin Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. Econometrics and Economic Theory in the 20th Century: the Ragnar Frisch Centennial Symposium, Cambridge: Cambridge University Press.

Pesaran, M. H., Shin, Y., Smith R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, Vol. 16, pp. 289-326. https://doi.org/10.1002/jae.616

Pillay, P. (2011). Higher Education and Economic Development, Wynberg, South Africa: Centre for Higher Education Transformation (CHET).

Raju, G. A., Khanapuri H. (2009). The Effect of Macroeconomic Factors on Indian Share Prices: A Sectoral Approach. Journal of Global Economy, Vol. 5, No. 2, pp.125-134.

Raza, S. A., Jawaid S.T. (2012). Foreign Capital Inflows, Economic Growth and Stock Market Capitalization in Asian Countries: An ARDL Bound Testing Approach. Quality and Quantity, Vol. 48, No. 1, pp.375-385. https://doi.org/10.1007/s11135-012-9774-4

Rooij, M. V., Lusardi, A., Alessie, R. (2007). Financial literacy and Stock Market Participation. Journal of Financial economics, Vol. 101, No. 2, pp. 449-472. https://doi.org/10.1016/j.jfineco.2011.03.006

Shahbaz, M., Nadeem, A., Ali, L. (2008). Stock Market Development and Economic Growth: ARDL Causality in Pakistan. International Research Journal of Finance Economics, Vol. 14, No. 1, pp. 182-195.

Spataro, L., Corsini, L. (2013). Endogenous financial literacy, saving and stock market participation. MPRA Paper, No. 44342, Munich: Munich University Library.

Tachiwou, M. A. (2009). Causality Tests between Stock Market Development and Economic Growth in West African Country. Economia, Vol. 12, pp. 14-27.

Thomas, B. Lloyd (2006). Money, Banking, and Financial Markets, 1 st Edition, Ohio: Thomson.

Toda, H. Y., Yamamoto (1995). Statistical inference in Vector Autoregressions with possibly integrated processes. Journal of Econometrics, Vol. 66, pp. 225-250. https://doi.org/10.1016/0304-4076(94)01616-8

Te Velde, D. W. (2005). Globalisation and Education what do the trade, investment, and migration literatures tell us? Working Paper, No. 254: Overseas Development Institute.

Wongbangpo, P., Sharma, S.C. (2002). Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries. Journal of Asian Economics, Vol. 13, No. 1, pp. 27-51. https://doi.org/10.1016/S1049-0078(01)00111-7

Yartey, C. A. (2008). The determinants of stock market development in emerging economies: is South Africa different? IMF Working Paper, No. 08/38, Washington DC: International Monetary Fund. https://doi.org/10.5089/9781451868944.001

Yartey, C. A. (2010). The Institutional and Macroeconomic Determinants of Stock Market Development in Emerging Economies, Applied Financial Economics, Vol. 20, pp. 1615-1625. https://doi.org/10.1080/09603107.2010.522519

Downloads

Published

06.10.2020

How to Cite

ABEDIN, Md. Thasinul, et al. “SOCIOECONOMIC FACTORS OF STOCK MARKET DEVELOPMENT: ROLE OF TERTIARY EDUCATION”. Journal of European Economy, vol. 19, no. 2, Oct. 2020, pp. 224-45, doi:10.35774/jee2020.02.224.

Issue

Vol. 19 No. 2 (2020): JOURNAL OF EUROPEAN ECONOMY

Section

MACROECONOMICS

License

Authors who publish with this journal agree to the following terms:

 
  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).