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Institutional Investors and Stock Market Development: A Causality Study

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  • Guler Aras
  • Alovsat Muslumov

Abstract

This article examines causality relationships between institutional investors and stock market development based on the panel data compiled from 23 OECD countries for the years 1982 through 2000. In order to test causality relationship, Sims’ causality test based on Granger definition of causality was used in our study. Our empirical results provide evidence that there are statistically significant positive relationship between institutional investors and stock market development. The development of institutional investors is the Granger cause of stock market capitalization, whereas there are bi-directional causality relationship between institutional investor development and stock market liquidity. Research results support the idea that a country should promote the development of institutional investors for the establishment of well-developed securities market.

Suggested Citation

  • Guler Aras & Alovsat Muslumov, 2005. "Institutional Investors and Stock Market Development: A Causality Study," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 8(29), pages 1-14.
    • Handle: RePEc:bor:iserev:v:8:y:2005:i:29:p:1-14
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    References listed on IDEAS

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    Cited by:

    1. Paramita Mukherjee & Malabika Roy, 2016. "What Drives the Stock Market Return in India? An Exploration with Dynamic Factor Model," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 15(1), pages 119-145, April.
    2. Milos Laura Raisa, 2012. "Spillover Effects Of Pension Funds On Capital Markets. The Eu-15 Countries Case," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 164-170, December.
    3. Yilmaz Bayar & Marius Dan Gavriletea & Dan Constantin Danuletiu & Adina Elena Danuletiu & Emre Sakar, 2022. "Pension Funds, Insurance Companies and Stock Market Development: Evidence from Emerging Markets," Mathematics, MDPI, vol. 10(13), pages 1-13, July.
    4. Paramita Mukherjee & Malabika Roy, 2011. "The Nature and Determinants of Investments by Institutional Investors in the Indian Stock Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 10(3), pages 253-283, December.

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