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onship between stock markets and economic development.

To investigate the presence of causal effect between stock markets and economic development.

1.5 Research Questions

Specifically, there are two major questions need careful investigation that will serve as the engine of this study. The theoretical debate and the empirical observation give rise to several questions:

To investigate whether stock market has had a positive impact on economic development in the long-run?

To investigate whether stock market can promote long-run economic development – determine is there an optimal financial structure (stock market) to reflect the evolving needs of economies?

Significance of the Study

This study integrating the issue of relative importance of stock markets in the economic development, the channel and the complementarities issue in the analyses. The significance of the study as follows:-

This study would therefore provide additional information on the nature of the relationship between stock market and economic development in five ASEAN countries.

This study adds a new element to the empirical growth-finance literature by applying an alternative approach to analyzing the differential and complementary effect of different components of financial development on economic development. In addition, the results complement existing causality evidence.

Again, by employing co-integration technique and time-series data, the study would provide a more appropriate framework for analyzing the dynamic relationship between stock market and economic development.

1.7 Organization of Project Paper

Chapter 1 provides an introduction on the problem of research. Chapter 2 the relevant literatures related to stock market and economic development will be reviewed. This is followed by a proposal of the theoretical and empirical framework. Chapter 3 discusses the methodology of study and also the sources of data. Subsequently, Chapter 4 analyzes the findings of the study. Finally, the managerial implications and the conclusion of the research will be discussed in Chapter 5.

Figure 1: Stock Market Development, 1990 - 2011

Source: World Development Indicator

Figure 2: Market Capitalization and GDP in $ Billions

Source: World Development Indicator

Figure 3: Ratio of Market Capitalization in Relation to GDP (%)

Source: World Development Indicator

CHAPTER 2

LITERATURE REVIEW

Definitions

Banks provide a place where individuals and businesses can invest their funds to earn interest with a minimum of risk whereas stock market is somehow abstract for the mechanism that enables the trading of company stock. It is also used to describe the totality of all stocks, especially within a country. The stock market is the market where common stock (or just stock), representing ownership in a company, are traded Mishkin and Eakins (2011). In simple terms, stock market is the place to buy and sell stocks and shares. This is where the trading is handled. Hence, it has become an important engine for the economy market, providing companies’ access to investors and capital. Investors risk their capital the possibility of profit based on the future performance of the comp