The Importance Of Stock Market

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Stock market is a big and popular market all over the world as it indicates the overall performance of all companies to develop the economy. Stock market become a crucial institution in an economy which greatly determines and indicates the performance of an economy that will reflects the performance of country. In essence, a supply and demand will determined the price of a stock (Al-Shubiri, 2010). The number of shares that firm issues is known as the supply of stock, while the demand is based on people who want to buy shares from shareholders who already own them.

A stock market plays a major role of enhancing the efficiency of capital formation and allocation in term of economic institution. Thus, a function of how well the stock market
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Efficient capital market can enhance the growth and wealth of the economy by maintaining the financial sector and with provision of a good channel for investment which play a very important role to engage domestic and foreign investors. The changes in its index of stock market performance can be measured by different factors including macroeconomic social and political…show more content…
In fact, other businesses were also indirectly affected including the consumers where they were of the notion that the increase in the price of the retail petroleum products could cause a general increase in the price of goods and services in the market.

The impact of inflation on stock market returns is becomes an important issue for a many years. Inflation is most important macroeconomic variable that have negative impact on economic activities. Higher inflation lead the interest rate be higher and it cause the rate of returns on stock will be raised. To get the knowledge about the impact of inflation is very important for an investor if it became out of control then plans may destroyed.

Exchange rate and stock returns also have a relationship. Foreign depositor changes their profits on stocks into their own cash. Foreign depositor get exaggerated when local cash gets stronger and changed into weaker cash. Exchange rate show negative relation with stock returns. Stock returns reduce when exchange rate enhances and reduces in exchange rate show positive impact on stock market
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