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    Stock market capitalization and financial openness : The case of United Arab Emirate
    (İstanbul Gelişim Üniversitesi Lisansüstü Eğitim Enstitüsü, 2024) Zhansultanova, Aigerim
    The United Arab Emirates and the Gulf region are increasingly becoming centers of gravity for financial investment and stock market activities. Additionally, financial openness provides avenues for more inflows into markets previously considered as no-go areas. The amount of inflow, the market capitalization volumes, and the boom in certain markets are particularly ascribed to the kind of institutional regimes and the level of financial liberalization that exist. To this end, there are several literatures on advanced economies with a few on the emerging market. This requires further study to understand the relationship between the stock market and financial openness in the Gulf states. This study seeks to explore the impact of a liberalized financial market on stock market capitalization in the UAE. The study employed annual time series data from 2000 to 2021 from the World Bank’s World Development Indicators (WDI) and the International Monetary Fund’s Financial Development datasets. This research aims to examine the impact of financial openness on stock market capitalization. More so, it seeks to investigate the relationship between institutional quality on stock market performance and to also ascertain how some macroeconomic indicators influence stock market performance in the UAE. The study used the Autoregressive Distributed Lag (ARDL) estimation technique and the results revealed that in the long run, financial openness has a positive relationship with stock market capitalization. More so, institutional quality indicators such as the rule of law and government effectiveness, as well as bank stability, and gross fixed capital formation have a positive impact on stock market capitalization in the long run. However, the quality of regulation, government expenditure, and GDP growth hurt market capitalization in the long run. In the short run, the study finds that financial liberalization, government expenditure, quality regulations, effective governance, and GDP growth rate harm market capitalization. However, the rule of law has a positive impact on stock market capitalization. The findings show the importance of financial openness, the rule of law, effective governance, capital formation, and stable financial systems in the future stock market in the UAE. The study further suggested the formulation and implementation of policies that will strengthen the quality of financial sector regulations which can pose more confidence in the capital market.