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Determinants of Stock Market Performance in Nepal

Author

Listed:
  • Prakash Kumar Shrestha Ph.D.
  • Biggyan Raj Subedi

    (Nepal Rastra Bank)

Abstract

This paper empirically examines the determinants of the stock market performance in Nepal using monthly data for the period of mid-August 2000 to mid-July 2014. The impact of major changes in politics and Nepal Rastra Bank’s policy on lending against share collateral has also been assessed. Empirical results obtained from OLS estimations of behavioural equations reveal that the performance of stock market is found to respond positively to inflation and broad money growth, and negatively to interest rate. This suggests that, in Nepal, share investors seem to take equity as a hedge against inflation and consider stock as an alternative financial instrument. Further, availability of liquidity and the low interest rates stimulate the performance of the Nepalese stock market. More importantly, stock market has been found to respond significantly to changes in political environment and the policy of Nepal Rastra Bank. These findings help to design policies to stabilize or stimulate the share market in Nepal.

Suggested Citation

  • Prakash Kumar Shrestha Ph.D. & Biggyan Raj Subedi, 2014. "Determinants of Stock Market Performance in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 26(2), pages 25-40, October.
    • Handle: RePEc:nrb:journl:v:26:y:2014:i:2:p:25
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    File URL: http://www.nrb.org.np/ecorev/pdffiles/vol26-2_art2.pdf
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    Cited by:

    1. Ezu, Gideon Kasie PhD & Ukoh, Josephine.E, PhD, 2021. "Monetary Policy Instruments and Performance of Nigeria Capital Market," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(11), pages 720-726, November.

    More about this item

    Keywords

    Stock Market; Macro Variables; Nepal;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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