A STUDY ON RELATIONSHIP BETWEEN STOCK MARKET AND ECONOMIC GROWTH IN NEPAL

Abstract

This study examine the relationship between stock market and economic growth. The analysis covers the period from fiscal year 2014/15 to 2023/24, reflecting the stock market’s evolution since its inception in 1994. Secondary data has been utilized to investigate key variables, including Gross Domestic Product (GDP), market capitalization, turnover, the number of listed securities, and the market index. These variables provide a comprehensive view of both the stock market’s status and its impact on the broader economy. The analysis of relationships between these stock market indicators and GDP reveals that the number of listed securities has a significant positive impact on economic growth. This suggests that an increase in the number of listed companies is associated with greater economic activity, potentially due to improved access to capital and increased business opportunities. This finding supports the idea that a more developed stock market can contribute to economic expansion by fostering investment and growth. In contrast, other stock market indicators such as market capitalization, turnover, and the NEPSE Index show weaker or non-significant relationships with GDP. Market capitalization and turnover, despite indicating stock market size and activity, do not show a statistically significant impact on GDP. This implies that while these variables reflect aspects of market activity, their direct influence on economic growth may be limited or overshadowed by other factors. These findings suggest that the stock market's influence on economic growth is complex and may be affected by a range of factors beyond stock trading and market activity. While a growing number of listed securities is positively correlated with economic growth, other aspects of stock market performance might not have a straightforward or immediate impact on the broader economy.