What drives stock market growth? A case of a volatile emerging economy

Syed Mujahid Hussain*, Timo Korkeamäki, Danielle Xu, Ashfaque Hasan Khan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


We study the determinants of the explosive stock market growth and increased foreign portfolio investment in Pakistan. Our results indicate that in contrast to evidence from developed markets, the aggregate stock returns are not driven by macroeconomic fundamentals in Pakistan. Moreover, foreign portfolio investors do not tend to react to changes in economic variables in Pakistan. As fundamentals fail to affect stock returns in Pakistan, they may be based more on speculative motives. Our results suggest that in the absence of a strong institutional and regulatory framework, economic policies have only a limited effect on stabilizing an emerging market.

Original languageEnglish
Pages (from-to)209-223
Number of pages15
JournalEmerging Markets Finance and Trade
Issue number1
Publication statusPublished - 2015
Externally publishedYes


  • Emerging markets
  • Foreign portfolio investment
  • Macroeconomic announcements
  • Speculative
  • Trading

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)


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