STOCK MARKET PERFORMANCE AND THE ECONOMIC GROWTH OF THE PHILIPPINES (1990-2011)

Abstract

The stock market is seen as the most exciting and promising indicator of the economic growth of a country. However, there have been the growing concerns and controversies about the role of the stock markets on economic growth and development. Also, studies on this topic show that there are many potential effects of the stock market on economic growth. This study specifically examines the relationship between the stock market performance and the economic growth of the Philippines. The study used secondary data which will be collected from the Annual Report of the Philippines Stock Exchange Index (PSEi); Security and Exchange Commission (SEC). The Granger Causality has been carried out following the Augmented Dickey-Fuller test for it is relevant to time series variables and in order to assess whether there is any potential predictability power of one indicator for the other. This study employed gross domestic (GDP) as the dependent variable; the independent variables include Market Capitalization (MC) and total Value of Shares traded (VST). The study shows that the Market Capitalization has no relationship with GDP and likewise, it also revealed that the Value of Shares traded has no relationship with GDP.