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

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  • Khrawish, Husni Ali
  • Siam, Walid Zakaria
  • Jaradat, Mohammad

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.

Suggested Citation

  • Khrawish, Husni Ali & Siam, Walid Zakaria & Jaradat, Mohammad, 2010. "The relationships between stock market capitalization rate and interest rate: Evidence from Jordan," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 2(2), pages 1-7, July.
    • Handle: RePEc:ags:pdcbeh:95964
    DOI: 10.22004/ag.econ.95964
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    References listed on IDEAS

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    Cited by:

    1. Massomeh Hajilee & Farhang Niroomand & Linda A. Hayes, 2023. "The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 539-566, September.
    2. Edirin Jeroh, 2012. "Interest Rate Variations and Stock Market Capitalization in Nigeria: An Empirical Analysis," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 5(5), pages 5-14, October.

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