The Stock Market – The stock market is an array of exchanges where profitable companies go to raise huge amounts of cash in order to grow. Stocks are shares of ownership of a public company that are sold to shareholders through broker dealers. The shareholders make money
.3.3 Inflation Rate The inflation rate used as an indicator in measuring the stability of economic condition for a particular country (Rashid et al., 2011). In financial theory, inflation rate reflected by consumer price index (CPI) represents all the price of goods and services will go up and it need to take more money to buy the same items. Moreover, high inflation is likely cause a great impact on economic activities of a particular country because it reduces the purchasing power of domestic consumers and it would lead to currency value decline. The previous researchers believe that the inflation rate will influence the stock market return. There are many empirical studies establish that the inflation rate has an impact on stock market
The stock market is a dangerous and risky business, but it can also be put to good use. Stocks to most people are just something an individual will invest in as an extra form of income. However, some people make a living on just investing and putting all of their time in the stock market. The people who make tons of money in the stock market are extremely strategic and smart with how they go about this process. Business’ can benefit from the investments that go on in this market also.
The main purpose of this capital market theory model is that seeks to “price assets” but more popularly “shares” among investors. In all-purposes if an individual is to generate an investment in a company or a retirement plan that
As indicated by the utilitarian methodology, financial markets encourage the stream of funds with a specific end goal to finance investments by companies, governments and people. Financial institutions are the key players in the financial markets as they perform the capacity of intermediation and in this manner decide the stream of funds. Capital markets encourage the offer of long haul securities by shortfall units to surplus units. Moreover, the securities exchanged this market are alluded to as capital market securities which incorporate bonds, mortgages and stock. It has been observed that in the late 19th century the bond market witnessed a huge upsurge; however, this boom in the market was not permanent and financial market faced severe decline.
However the negative association between inflation and economic growth has been pointed out in some other countries. It also depends on the economic environment. Inflation can also be helpful in promoting economic growth. Pakistan faces internal and external threats which lead to macroeconomic problems. Inflation is also an ill for the growth of an economy.
On this case inflation and economic growth are related terms with a common contention relationship, because there is a positive and important link and as well negative ones between inflation and economic growth. Thus, high inflation is extremely affect the economy in terms of bad performance, because high inflation cause a lot of issues such as it can decrease the purchasing power of the dollar and increase wages which will lead the numerous people’ income become less sufficient to them and cannot afford to satisfy their need and wants, and it cause transaction movement in the market become slow and shortage of necessity products and services, and when high inflation affect price level is giving a hard time, a very complicated situation that can make hardly to forecast future market behavior precisely. This condition is also lead up to business investment become slows. Basically high inflation gives a government, economist a hard time to dominate and standardize the inflation rate. And on the other hand, too low or decreasing inflation can also affect economy in term rate of employment and high output.
According to Ariff, M., Chung, T. & Shamsher, M. (2012), the findings support that liquidity effect on stock market return. An increase in money supply lead to increase aggregate demand and economic activity. This will also cause higher liquidity, and making people feel wealthier and thus they will more prefer to invest rather than
The numerous short terms and long term securities, covered by business finance, and have contributed to the development of money market and capital market in the country. 12. Finance is needed for the replacement and renewal of old and obsolete plant and machine. 13. By ensuring wise distribution of funds, finance contributes to balanced regional development in the country.
Abstract This paper verifies whether a rise in Inflation rate can lead to Currency appreciation or not. Our primary hypothesis was that currency depreciation is actually the inevitable cause of a rise in the inflation rate; however there can also be a few instances where in fact a rising price level can lead to a fall in the Exchange rates. The paper begins with a summarised description along with the literature review involving cases where the economists and researchers support “Depreciation” or “Appreciation” followed by a rise in the price level. Then we have showcased an empirical analysis using a simple regression (OLS method) to capture how the net inflation rates are correlated to the Exchange rates. Our end result, although somewhat