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Dynamics of emerging stock market with growing China dominated foreign participation

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  • Samson E. Edo

Abstract

This paper aims at determining the extent to which an emerging stock market can be dynamic in responding to investors' behaviour, adjusting to steady state, reacting to unanticipated changes, and predicting future activities. Vector auto-regressive model and vector error-correction model are specified to depict the emerging stock market. Estimation of the models produced results indicating significant response of the market driven by trading activities of domestic institutional investors and foreign investors, and a good predictability of future activities in the market. However, the adjustment speed of the market is unimpressive and its ability to absorb unanticipated changes appears low. The implications of these findings are quite clear. Investors have become very active in the market and future trend of activities in the market has become more predictable, but efficiency and resilience of the market remain weak. Appropriate policies may therefore be deployed to further enhance development of the market.

Suggested Citation

  • Samson E. Edo, 2014. "Dynamics of emerging stock market with growing China dominated foreign participation," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 6(3), pages 247-270.
    • Handle: RePEc:ids:ijbema:v:6:y:2014:i:3:p:247-270
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