What factors explain stock market retardation in Islamic Countries

Ginanjar Dewandaru, Syed Aun R. Rizvi, Obiyathulla Bacha and Abul Masih

Emerging Markets Review, 2014, vol. 19, issue C, 106-127

Abstract: Stock markets have been recognized in literature as a source of financial development and economic growth. Notwithstanding the recent trend of the stock market development in emerging countries, some argue that Islamic countries' stock exchanges are still infantile. The central aim of this research, therefore, is to investigate factors impeding stock market development (SMD) in Islamic countries. We explore a panel annual data of 11 main Islamic countries vis-à-vis the developed countries for the period of 1996–2011. The findings show that all of our concerned macroeconomic determinants play a major role in the developed countries. On the other hand, financial openness has substantially less contribution in Islamic countries, while the financial intermediary development plays a major role. The results are also indicative of the need for the Islamic countries to improve their legal environment and economic freedom. Lastly, we also attempt to measure the integration level, where the findings tend to indicate a relatively lower and unstable pattern of integration for the Islamic countries, suggesting the impact of volatile inflows.

Keywords: Stock market development; Emerging Muslim countries; Market integration (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:19:y:2014:i:c:p:106-127

DOI: 10.1016/j.ememar.2014.04.006

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