One of the most salient features of stock exchange is that it provides liquidity to investors who are often in need of trading their securities without loss of time and value. One of the most important functions of the stock market is that it can serve as a strong indicator of price discovery. Since securities held by shareholders represent claims against the real assets of a firm, their price indicates the return that their assets can fetch from the market, if they are realized. This important function of price discovery provides necessary impetus to the organizations to issue new stock and arrange relatively cheaper funds from external sources to fund the future expansion.
The return from the shareholdings of an investor is the strong factor that keeps him/her to maintain investment with the same firm and inspire him to buy more of the same firm. However, the size of market return is not reliable as it is subject to variations over time owing to many factors, mostly beyond the control of an individual firm. The factors that determine and influence the return and/price of stocks are coined as the determinants of stock market return. ...
However, these forces are decided by many factors, which include both internal and external variables that can influence the investment decision of investors. From another perspective, these factors may be categorized as systematic factors (economic, political or sociological changes) that are common to all securities and unsystematic factors (company specific factors), which are unique to certain industries or firms. This chapter is meant to document the studies and researches undertaken across different parts of the world on the subject matter of stock market return and its determinants. This literature review covers a wide spectrum of empirical as well as non-empirical studies conducted to study the economic as well as non-economic variables, which influence the market behavior and return individually and collectively.
2.0 Stock Market
In today's investment arena stocks have been widely accepted as the most important investment avenue for individual as well as institutional investors. A stock is referred to as a financial claim against the real assets of a firm. It represents a valid legal claim in favor of its holder for the right to get periodical return and capital appreciation, if any. It not only represents the partial or pro-rata ownership of the investors in a firm but it also allows them to influence the decisions affecting the day to day affairs of the company. One of the most appealing features of the investment in stock is that it provides maximum protection and liquidity to the investors by allowing easy trading at stock exchange at agreeable prices. Even though stock represents ownership in a company, it does not mean that the shareholders are liable for the