The relationships between stock market capitalization rate and interest rate: Evidence from Jordan

Husni Ali Khrawish (), Walid Zakaria Siam () and Mohammad Jaradat ()
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Husni Ali Khrawish: Department of Banking and Financial Science, Hashemite University, Jordan.
Walid Zakaria Siam: Department of Accounting, Hashemite University, Jordan.
Mohammad Jaradat: Faculty of Economics & Administrative Sciences, Irbid University, Jordan.

Business and Economic Horizons (BEH), 2010, vol. 2, issue 2, 60-66

Abstract: The paper examines the effect of interest rates on the stock market capitalization rate in Amman Stock Exchange (ASE) over the period of (1999-2008). It is used the OLS regression method, multiple linear regression model and simple regression model. The time series analysis revealed that there are significant and positive relationship between government Prevailing interest rate (R) and stock market capitalization rate (S). The study shows that Government development stock rate (D) exerts negative influence on stock market capitalization rate (S), also it finds a significant and negative relationship between government Prevailing interest rate (R) and Government development stock rate (D). Finally, this study suggested the importance of government intervention to encourage investment in ASE by reducing rate of personal taxation thus, granting incentive for creation of wealth, control interest rate so as to aid the growth of the stock market and improving the regulatory environment and decreasing red tape.

Keywords: Stock market capitalization rate; prevailing interest rate; government development stock rate. (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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