The Impact of Financial Markets Development on Stock Market’s Risk (Selected of D8 Countries)

Financial Market is one of the major economic sectors in each country and financial liberalization and strengthening of financial markets play a key role in economic growth. Whereas, the effect of financial markets on the economics is so significant that without an efficient financial division, achieving the economic growth is not feasible. Further, due to the presence of risk in stock market and that the prosperity of any economy is related to the performance of financial markets, the study of risk factors thereof is of great importance. In the present study, the effect of financial market development on stock market risk has been explored for D8 countries (Malaysia, Turkey, Egypt, Iran, Indonesia, and Pakistan) during 2005-2015. To estimate the model we use Ordinary Least Square Method in Panel data approach. Empirical the results show that the effect of financial development on stock market risk as for proxy one (The ratio of capitalization of stock market) had been negative and statistically significant, and it has been positive and statistically significant for another proxy (the number of embraced enterprises in stock market). Likewise, the GDP and foreign currency fluctuations have entailed negative and significant effect respectively, and financial openness also has had positive and significant effect on stock market risk.