This paper examines the empirical association between stock market development and economic growth for a period of ten years around the Indian market “liberalization” event. We find no support for the hypothesis that the Indian stock market development is associated with the economic growth in that country during the entire event study period of 1981 to 2001. We find support for relevance of stock market to econmic development during the pre-liberalization sub-period. We also find a negative correlation between stock market development and economic growth for the post-liberalization period. We offer a number of hypotheses consistent with the inverse relationship between growth and stock market development in the post-liberalization period. In particular, our results are consistent with the suggestion that the Indian Stock market is a casino for the sub-period of post liberalization and for the entire ten-year event study period.
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Azarmi et al. (2011) studied this question.
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