Institutional Investors and Stock Market Development: A Causality Study (2024)

International Journal of Financial Research

The research investigated the relationship linking stock market development and economic growth from 1985 to 2018. In measuring growth, Gross domestic product (GDP) was adopted, while stock market was surrogated by turnover ratio, market-capitalization, and value of share- traded, sourced from the Central Bank of Nigeria (CBN) and the Security and Exchange Commission Database. The inclusion of money supply (M3) captured innovation (financial) in the monetary sector. In investigating the aforementioned relationship, the ARDL Bound test methodology was adopted. Empirical results from the investigation confirm the existence of a long-run relationship between stock market development and growth. Similarly, there was a positive relationship between indices of stock market development and growth, albeit statistically insignificant. The study concluded that financial institutions should concentrate on financial innovation in other dimensions in other to boost stock market performance that ...

Journal of Business & Economics Research (JBER), 2011

Facta Universitatis. Series: Economics and Organization, 2006

Asian Journal of Research, 2017

Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA). This step was taken to add some source of capital formation in India as other developing economies were already in this

African Journal of Business Management, 2016

Journal of Nepalese Business Studies, 2007

With the gradual abolishment of barriers on capital inflow, there has been a surge of investment into the Indian economy. A significant impact of foreign investment has always been felt on the stock market indices which tend to vary according to its flow.

Managerial Finance, 2004

In this paper we investigate the influence of institutional investors on share prices using data from companies quoted on the Athens Stock Exchange. For finance theorists the value of an investment, real or financial, is a function of its expected benefits and the riskiness of these benefits. Whatever influences are exerted by the structure of equity ownership are diversified away by efficient risk‐averse investors. Managerial and agency theorists argue that the particular ownership structure may have an effect on share value or returns. Their arguments are based (mainly) on the consequences of the separation of ownership from control. In addition to traditional methods of estimation we have used Chamberlain’s (1982) multivariate panel data estimator, which allows for arbitrary patterns of error autocorrelation and parameter temporal behavior. Among all alternative methods of estimation used, only this one produced a statistically significant and econometrically well specified relat...

Applied Economics, 2011

ICRBIT - 2015, 2015

African Development Review, 2017

ERN: Other Emerging Markets Economics: Macroeconomic Issues & Challenges (Topic), 2018

This paper investigates the trading and investment behavior of the institutional investors in the Indian capital market post-financial crisis and their effect on the market performance. The study is based on the panel data sets drawn from the NIFTY 500 companies for eight years from FY 2008 –09 to FY 2015–16, employing panel data econometric models (fixed effect and random effect) analysis. The results suggest that foreign institutional investors (FII) are having the edge over the domestic institutional investors (DII) in the Indian market. FIIs enhance the market performance, whereas DIIs dampen the market performance. Subsequently, we find that equity investment from banks and insurance companies have a detrimental effect, while mutual fund investment has no significant impact on the market performance of the Indian firms. These results imply that FIIs are better-informed players and follow the positive feedback trading behavior. On the other hand, DIIs, banks, and insurance compa...

The purpose of this paper is the empirically examination of the effect of the Institutional Quality Components (Voice and Accountability, political stability and Absence of Violence and Terrorism, government effectiveness, regulatory quality, rule of law and control of corruption) on the prediction of total stock price index. The study was carried out using data extracted from 53 countries from the World Bank and Thomson Data Stream website over a period of 15 years between 2002 and 2016. The results of this study in various countries surveyed showed that the components of institutional quality have a positive and significant effect on the total stock price index. The results show that, as the institutional quality of the countries improves, the stock price index will increase. The results also indicate that identifying the institutional weaknesses in developing and developed countries would be a pathway to improve the investment in the capital markets.

Resources Policy, 2022

This study examines the impact of natural resources rents on the stock market and the role of institutional quality in managing resource revenues in shaping the stock market development utilizing data from 1991 to 2019 for G-7 economies. The current study employed the latest econometric techniques to exploit the moderating role of institutional quality in this nexus. The current study applied panel unit root with structural breaks to the envisaged variable. The results confirm the unique order of integration among the variables. Further, the Westerlund Panel cointegration is used that confirmed the long-run relationship among the variables. The longrun elasticities have been identified using the dynamic system GMM. This study found a positive effect of resources rent on the stock market and moderating role of institutional quality in enhancing the stock market resource blessing. Finally, Dumitrescu-Hurlin Causality analysis for possible causation is applied. The results depict that there is bidirectional causality between stock market development and economic growth, and moderating variable. This study recommends that since the stock market and banking system operate differently, a trade-off policy concerning institutional quality is needed to efficiently channel the windfall revenues through the financial system to protect the interest of different stakeholders. With the reinforcement and implementation of the efficient institutional framework, the natural resource revenues can further support stock market development.

This study examines the dynamic interaction of institutional fund flows and stock returns volatility using daily data. Foreign institutional investors (FIIs) and mutual funds' net equity investment have been considered simultaneously using the vector auto-regression (VAR) model. The findings show that both mutual funds' as well as FIIs' net investment on equity jointly influences the stock market. While the mutual funds' net investments positively influence stock market volatility, the FIIs' net investments negatively impact volatility. However, in the presence of market fundamentals, it is found that FII's net flow does not show significant influence on market volatility , but mutual funds net flow has a significant impact on market volatility at least at the second lags. It has also been observed that the investment activities of FIIs and mutual funds are interrelated. Causality test indicates that there exists a bidirectional causation between FII's net flow and market volatility, whereas mutual funds flows do not cause volatility.

SSRN Electronic Journal, 2010

Economic Systems, 2002