Correlation between Economy And Stock Markets

A Mutual Correlation is well existed between the Economic Factors of country and fluctuations in Stock markets. Any intense factor influence both economy as well as stock markets.

If a news analyzing how economy was gradually breaking down, why not it can arise fears in the stock market investors, same reason leads to disinvestments their share holdings and exercising option calls tendering a correction in stock markets.

Likewise Volatility and Continuous Corrections in stock markets indicate structural negotiations on national economic condition.

But in fact, above is not true in all cases as countries like America and other developed countries liquidity levels are high containing maximum available liquidity as stock markets investment, but developing countries had only small proportion of their total capital as stock markets investment.


High investment countries experiences wider alterations in their liquidity available not much influence are economic countries with purposeful and protective investment measure in stock markets.

Taking example of sub-prime crisis occurred in America, leads economic imbalance but not economic breakdown, even through it presents feat in stock market trader and investors suggesting large stock market crash.

All Major Economic Factors Are Nothing But Stock Market Influences. Continuous trends happening in stock markets were more indicative of countries economy rather than intra-day volatility.

Essential Factors Of Economy:
The Financial Growth Rate of Country, GDP, Recession Concerns, Government control, Reserve Bank Liquidity considerations, Investors Support all are the essential factors for economy.

Minor Economic Factors, But Major Stock market Persuaders:
But reversibly stock indices are intimated by Institutional Investors including national and foreign investors, Retail investors, Greed and Fear, Rumors, low influence but highly popularized issues, Fraud in small companies etc. Are minor economic factors, but they may become stock market rulers for sufficient longer periods.

Alternatively stock markets are much based on sentiment and technical analyzing, which are not having any importance in economy of country.


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