Impact of Globalization on Stock Market Development: Evidence from Pakistan

Abstract

Pakistan is an emerging market, which has always fought hard to maintain its economy and growth. Globalization refers to depict the development of relationships among world's economies, population, culture guided by foreign trade of goods and services, innovation, information, and flow of venture resulting into growth of organizations from low industrialized states to the larger markets. The study is aimed at investigating this underlying relationship. The study implies monthly data from a period of 2008 to 2019. Data has been collected from Pakistan stock exchange and the website of state bank of Pakistan. Variables such as, Market Capitalization, Foreign Direct Investment, Foreign Exchange Reserves, Remittance, trade openness, and Inflation, has been implied to calculate the impact of globalization on stock market. A secondary type of data and “STATA” software has been applied. The findings of this study revealed that foreign direct investment has a positive impact on stock market development in Pakistan. Similarly, the results of the study revealed that foreign direct investment, remittances, trade openness and foreign exchange reserves have a positive impact on stock market development while inflation has a negative impact on stock market development in Pakistan. Precisely, this study involves all the reasons explained by the reference of Neo-Classical Growth Theory, Porter’s Theory of Competitive Advantage and New Trade Theory