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Proceedings of The 26 International Business Information Management Association Conference th November 11-12, 2015 Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation Management and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Editor Khalid S. Soliman International Business Information Management Association (IBIMA) Copyright 2015 Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Conference Chair Khalid S. Soliman International Business Information Management Association, USA Program Chair Gregorio Martín-de-Castro The Complutense University of Madrid, Spain Organizing Committee Chair Susana de Juana Espinosa, University of Alicante, Spain Conference Advisory Committee John F. Affisco, Hofstra University, USA Abdul Rahman Ahmad, Universiti Tun Hussein Onn Malaysia, Malaysia Omar Al-Azzam, University of Minnesota Crookston, USA Hesham H. Ali, University of Nebraska at Omaha, USA Najiba Benabess, Norwich University, Northfield, USA Az-Eddine Bennani, Reims Management School, France Emil Boasson, Central Michigan University, USA Regina Connolly, Dublin City University, Ireland Reggie Davidrajuh, Stavanger University College, Norway Susana de Juana Espinosa, Universidad de Alicante, Spain Xiuzhen Feng, Beijing University of Technology, China Mohammad Ayub Khan, Technologico de Monterrey, Mexico Sherif Kamel, The American University in Cairo, Egypt Roman Povalej, University of Karlsruhe (TH), Germany Alcina Prata, ESCE, Portugal Muhammad Najib Razali, Universiti Hussein Onn Malaysia, Malaysia Joseph Sarkis, Clark University, USA Najib Saylani, Florida State College at Jacksonville, USA Magdy Serour, InContext Solutions, Australia Amine Nehari Talet, King Fahd University of Petroleum & Mineral, KSA Abraham G. van der Vyver, Monash University, South Africa Dianne Wingham, Australia Paul H.P. Yeow, Monash University, Sunway Campus, Malaysia II Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Program Committee Mohamed N. A. Abdelhakim, University Al Ghurair, UAE Tarek Abdellatif, University SUPTECH, Tunisia Mohd Helmy Abd Wahab, Univ. Tun Hussein Onn Malaysia, Malaysia Azizan Abdullah, Universiti Teknologi MARA, Malaysia Haslinda Abdullah, National Defence University of Malaysia, Malaysia Lahsen Abouenour, Mohammed V Rabat University, Morocco Jennifer Abou Hamad, Notre Dame University, Lebanon Ahmad Abu Alrub, Cyprus International University, North Cyprus (TRNC) Nasrine S. Abushakra, Leigh University, USA Mirela Ionela Aceleanu, The Bucharest University of Economic Studies, Romania Pavel Adámek, Silesian University in Opava, School of Business Administration in Karvina, Czech Republic Mayowa G. Agboola, Covenant University, Nigeria Abd Rahman Ahmad, Universiti Tun Hussein Onn, Malaysia Faudziah Ahmad, Universiti Utara Malaysia, Malaysia Khalifa Ahsina, Ibn Tofail University, Morocco Sidi Mahmoud Aidara Mbibi, Université Laval, Canada Othman Akmal Aini, Universiti Teknologi MARA Johor, Malaysia Adel Ismail Al-Alawi, University of Bahrain, Bahrain Ali Alashwal, University of Malaya, Malaysia Tahereh Alavi Hojjat, DeSales University, USA Philip Alege, Covenant University, Nigeria Abeer Hmoud Al-Faouri, Al-Balqa Applied University, Jordan Abdullah Al-Hamdani, Sultan Qaboos University, Oman Abdullah Alharbi, University of Technology, Sydney, Australia Dawuda Alhassan, Tomas Bata University in Zlin, Czech Republic Mohammad Mansour Fawwaz Al-Khasawneh, The World Islamic Sciences and Education University (WISE), Jordan Kamla Ali Al-Busaidi, Sultan Qaboos University, Oman Zahran Al-Salti, Sultan Qaboos University, Oman Munadil Khaleel Faaeq Al-Sammarraie, Cihan University, Iraq Haya Alshehri, University of Salford, UK Dea’a Al-Deen Omar Al-Sraheen, Al-Zaytoonah University of Jordan, Jordan Yehia Alzoubi, University of Technology Sydney (UTS), Australia Tijani Amara, Gafsa University, Tunisia Luis Amaral, University of Minho, Portugal Ikram Amous Ben Amor, Sfax University, Tunisia Lekan Amusan, Covenant University, Nigeria Rahma Amri, Ecole Nationale des Sciences de l’Informatique (ENSI), Tunisia Rahul Anant Kulkarni, Smt.S.M.Agrawal Institute of Management,Chalisgaon,North Maharashtra University, India Jean Vasile Andrei, Petroleum-Gas University of Ploiesti, Romania Klara Antlova, Technical University of Liberec, Czech Republic Herman Shah Anuar, Universiti Utara Malaysia, Malaysia Anisoara Niculina Apetri, Stefan Cel Mmare University Suceava, Romania Mohd Noah A. Rahman, Institut Teknologi Brunei, Brunei Nicoleta Asalos, Ovidius University of Constanta, Romania Aderemi A. Atayero, Covenant University, Nigeria Ahmed Azam, DeVry University, USA A. A. Azeta, Covenant University, Nigeria Dominic Azuh, Covenant University Ota, Nigeria Naima Bakor Bogari, King Abdulaziz University, Saudi Arabia III Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Jolanta Baran, Silesian University of Technology, Poland Nicoleta Bărbuţă-Mişu, ”Dunărea de Jos” University of Galati, Romania Vladimir Bartosek, Brno University of Technology, Czech Republic Lorena Batagan, Bucharest University of Economics, Romania Emad Bataineh, Zayed University, UAE Blanka Bazsova, VŠB-Technical University of Ostrava, Czech Republic Jon W. Beard, Purdue University, USA Silviu Beciu, University of Agronomic Sciences and Veterinary Medicine of Bucharest, Romania Ines Belgacem, Institut des Hautes Etudes Commerciales Sousse, Tunisia Hassan Bellihi, Ibn Zohr University, Morocco Nicola Bellantuono, Politecnico di Bari, Italy Hanene Ben-Abdallah, King Abdulaziz University, Faculty of Computing and Information Technology, KSA Nadia Ben Romdhane, University Sousse, Tunisia Imene Ben Yahia, University of Sousse, Tunisia Intan Nurbaizura Binti Zainuddin, Universiti Teknologi MARA, Malaysia Ainur Zaireen Binti Zainudin, UTM, Malaysia Michaela Blahová, Tomas Bata University in Zlin, Czech Republic Dita Blažková, Brno University of Technology, Czech Republic Nicolae Bobitan, West University of Timisoara, Romania Gratiela Dana Boca, Technical University of Cluj Napoca, Romania Constanta-Nicoleta Bodea, Bucharest University of Economic Studies, Romania Alexandru Bodislav Dumitru, Bucharest University of Economic Studies, Romania Cîmpan Bogdan, Bucharest University of Economic Studies, Romania Carmen Boghean, Stefan cel Mare University, Romania Monica Boldea, West University of Timisoara, Romania Irina Boncea, Bucharest University of Economic Studies, Romania Daniela Liliana Borisov (Hincu), University of Economic Studies in Bucharest, Romania Ionel Bostan, University ”Stefan cel Mare” Suceava, Romania Josef Botlík, Silesian University in Opava, School of Business Administration in Karvina, Czech Republic Milena Botlíková, Silesian University in Opava, Czech Republic Liviu Bozga, Polithenica Bucharest, Romania Hafida Bouarfa, University Blida 1, Algeria Stéphane Bourliataux-Lajoinie, University IAE de Tours, France Ioana-Alexandra Bradea, Bucharest Academy of Economic Studies, Romania Béchir Brahmi, Central University, Tunisia Frederico Branco, University of Trás-os-Montes e Alto Douro, Portugal Pavla Breckova, University of Finance and Administration (abr. VSFS, www.vsfs.cz), Czech Republic Mazni Bte Alias, Multimedia University (Cyberjaya), Malaysia Alena Buchalcevova, University of Economics, Prague, Czech Republic Cristian Bucur, Petroleum-Gas University Ploiesti, Romania Marius Bulearca, Center for Industry and Services Economics, Romanian Academy, Bucharest, Romania Nicoleta Ramona Bunda, Ovidius University of Constanta, Romania Denisa-Florentina Burcea, University UASVM Bucharest, Romania Marek Bureš, University of West Bohemia, Czech Republic Vladimír Bureš, University of Hradec Králové, Czech Republic Cristina Burghelea, Hyperion University, Romania Mihail Buşu, The Bucharest University of Economic Studies, Romania Simona Buta, Stefan Cel Mare University Of Suceava, Romania Dagmar Čámská, Czech Technical University in Prague, Czech Republic Lourdes Canós Darós, Universitat Politècnica de València, Spain Anatolie Caraganciu, University ULB of Sibi, Romania Mihai Carp, “Alexandru Ioan Cuza” University of Iaşi, Romania Alejandro Cataldo, University of Talca, Chile Luis Cavique, Univ. Aberta, Portugal IV Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Vladimír Chalupský, Brno University of Technology, Czech Republic Aw Yoke Cheng, iCOOP College, Malaysia Goh Choon Yih, Multimedia University, Malaysia İbrahim Çil, Sakarya University, Turkey Bianca Cirjaliu, University Politehnica of Timisoara, Romania Laura Mariana Cismas, West University Of Timisoara, Romania Maria Ciurea (Măcriș), University of Petroșani, Romania Oana-Antonia Colibasanu, University of Bucharest, Romania Seria Crina, Bucharest University of Economic Studies, Romania Eduard Gabriel Ceptureanu, Bucharest University of Economic Studies, Romania Sebastian-Ion Ceptureanu, Bucharest University of Economic Studies, Romania Nizar Chaari, Université du Québec à Montréal, Canada Donna Champion, Loughborough University, UK Noorshella Che Nawi, University UMK, Malaysia Gan Chin Chuan, Sunway University, Malaysia Sock Lee Ching, University Science Malaysia, Malaysia Vít Chlebovský, University TU Brno, FBM, Czech Republic Zuzana Chvatalova, Brno University of Technology, Czech Republic Carmen Nadia Ciocoiu, Bucharest University of Economic Studies, Romania Cristian Ciurea, Bucharest University of Economic Studies, Romania Adela Coman, University of Bucharest, Romania Daniela Creţu, The University of Agronomic Sciences and Veterinary Medicine Bucharest, The Faculty of Management, Economic Engineering in Agriculture and Rural Development – Calarasi Branch, Romania Costin Damasaru, National University of Political Studies and Public Administration (NUPSPA), Romania Mihai-Ionut Danciu, Polytechnic University of Timisoara, Romania Tatiana Dănescu, University Petru Maior Tg. Mures, Romania Maria-Iuliana Dascalu, University Politehnica of Bucharest, Romania Aristides Dasso, Universidad Nacional de San Luis, Argentina Chamaru De Alwis, University of Kelaniya, Sri Lanka Camelia Delcea, Bucharest University of Economic Studies, Romania Pasquale Del Vecchio, University of Salento, Italy Imen Derouiche, University of Tunis, Tunisia Fitim Deari, South East European University, Macedonia Roxana Manuela Dicu, “Alexandru Ioan Cuza” University of Iasi, Romania Emil Dinga, Romanian Academy, Romania Diana Dobrescu, The Bucharest University of Economic Studies, Romania Răzvan Mihai Dobrescu, Universitatea Politehnica Bucharest, Romania Madalina Dociu, Bucharest Academy of Economic Studies, Romania Ozgur Dogerlioglu, Bogazici University, Turkey Aura Emanuela Domil, West University of Timisoara, Romania Sławomir Dorocki, Pedagogical University of Cracow, Poland Irina Madalina Doroftei, Bucharest University of Economic Studies, Romania Radek Doskocil, Brno University of Technology, Faculty of Business and Management, Czech Republic Karel Doubravský, Brno University of Technology, Czech Republic Petr Doucek, University of Economics, Prague, Czech Republic Elia Georgiana Dragomir, Petroleum- Gas University of Ploiesti, Romania Laurentiu Droj, University of Oradea, Romania Elena Druica, University of Bucharest, Romania Josef Dvorak, University of West Bohemia in Pilsen, Czech Republic Maria Elizabeth Eggink, Tshwane University of Technology, South Africa Chiraz El Hog, University Sfax, Tunisia Hanane Ellioua Zemmama, University Hassan 1st, Morocco Paula Fernández González, University Oviedo, Spain Isabel Ferreira, Polytechnic Institute of Cávado and Ave (IPCA), Portugal Elena Fifeková, Ekonomická univerzita v Bratislave, Slovakia V Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Bogdan Florin Filip, ”Al. I. Cuza” University of Iasi, Romania Gina Fintineru, University of Agronomic Sciences and Veterinary Medecine, Bucharest, Romania Dorian-Laurentiu Florea, The Bucharest University of Economic Studies, Romania Adegboye Folasade Bosede, Covenant University, Nigeria Iulian Furdu, University Vasile Alecsandri of Bacau, Romania Liem Gai Sin, Ma Chung University, Indonesia Karin Gajdová, Silesian university in Opava, Czech Republic Ana Salomé García Muñiz, University of Oviedo, Spain Karim Gasemi, Ecole Nationale de Commerce et de Gestion- Casablanca, Morocco Mircea Georgescu, Al. I. Cuza University of Iasi, Romania Mohamed Gharbi, Institut Supérieur des Etudes Technologiques de Bizerte, Tunisia Iuliana Raluca Gheorghe, “Carol Davila” University of Medicine and Pharmacy, Romania Ştefan Cristian Gherghina, Bucharest University of Economic Studies, Romania Alina Ginghina, Bucharest Academy of Economic Studies, Romania Veronica Grosu, Stefan cel Mare Suceava University, Romania Anna Lisa Guido, University Salento, Italy Mariem Gzara, University of Monastir, Tunisia Tatana Hajdikova, Faculty of management, University of Economics, Czech Republic Katja Harej Pulko, University of Maribor, Slovenia Dang Merduwati Hashim, Universiti Teknologi MARA, Malaysia Gy R. Hashim, Universiti Tekoologi Mara, Malaysia Indrani Hazarika, Higher Colleges of Technology Dubai Women’s Campus, United Arab Emirates Rym Hchich Hedhli, University of Tunis El Manar, Tunisia Martina Hedvicakova, University of Hradec Kralove, Czech Republic Roxana Herghiligiu, Alexandru Ioan Cuza University of Iasi, Romania Luis Hector Quintero Hernández, University of Guadalajara, México Pavlína Hejduková, University of West Bohemia, Faculty of Economics, Czech Republic Besma Hkiri, Institute of Commerce and Business of Bizerte, University of Carthage, Tunisia Hazar Y. Hmoud, University of Nottingham, UK Adelaida Cristina Honțuș, University of Agronomic Sciences and Veterinary Medicine of Bucharest – Romania, Faculty of Management, Economic Engineering in Agriculture and Rural Development, Romania M. Reza Hosseini, Deakin University, Australia Bassima Hout, University AUB, Lebanon Martin Hynek, University of West Bohemia in Pilsen, Czech Republic Viorela Beatrice Iacovoiu, Oil and Gas University of Ploiesti, Romania Eugenia Iancu, ”Ștefan cel Mare” University of Suceava, Romania Ramona Ștefania Igreț, Bucharest University of Economic Studies, Romania Anca Gabriela Ilie, Academy of Economic Study, Faculty of International Business and Economics, Romania Constantin Ilie, University OVIDIUS from Constanta, Romania Margareta Ilie, University Ovidius from Constanta, Romania Elena Mihaela Iliescu, “Nicolae Titulescu” University of Bucharest, Romania Irum Inayat, University of Malaya, Malaysia Gabriela Mariana Ionescu, Romanian Agency for Quality Assurance in Higher Education, Romania Nicolae Ionescu, Politehnica University of Bucharest, Romania Sabina Irimie, University of Petrosani, Romania Larisa Ivascu, University Politehnica Timisoara, Romania Frédéric Jallat, University ESCP Europe, France Suttisak Jantavongso, Rangsit University, Thailand Martin Januska, University of West Bohemia in Pilsen, Czech Republic Maria José Angélico Gonçalves, University ISCAP/IPP, Portugal Eva Jurickova, Tomas Bata University in Zlin, Czech Republic Damir Kalpić, University Zagreb, Croatia Tomáš Kamaryt, University of West Bohemia in Pilsen, Czech Republic VI Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Norhaya Kamarudin, Universiti Teknologi Malaysia, Malaysia Kyeong Kang, University of Technology Sydney, Australia Ibtissem Karboul, Faculté des sciences économiques et de gestion de Tunis, Tunisia Katerina Kashi, VSB – Technical University of Ostrava, Faculty of Economics, Czech Republic Mohd Khairudin Kasiran, Universiti Utara Malaysia, Malaysia Islem Khefacha, FSEG MAHDIA, University of Monastir, Tunisia Jasber Kaur, Universiti Teknologi MARA Malaysia, Malaysia Nermin Khalifa, University AAST, Egypt Hanen Khanchel Lakhoua, Université de Jendouba, Tunisia Fabian Khateb, Brno University of Technology, Czech Republic Rozalia Kicsi, „Ștefan cel Mare” University of Suceava, Romania Ng Kim-Soon, Universiti Tun Hussein Onn Malaysia, Malaysia Alžbeta Kiráľová, University College of Business in Prague, Czech Republic Hana Klcova, Brno University of Technology, Czech Republic Martin Klepek, Silesian University in Opava, Czech Republic Gábor Klimkó, Budapest Corvinus University, Hungary Woo Kok Hoong, University UTAR, Malaysia Christophe Kolski, University of Valenciennes, France Zdeňka Konečná, Brno University of Technology, Czech Republic Petra Koudelková, Faculty of Social Sciences Charles University in Prague, Czech Republic Saoussen Kouki, FSEGT, Tunisia Lubos Kotek, Brno University of Technology, Czech Republic Eva Kotlánová, University SU in Opava, School of Business Administration in Karvina, Czech Republic Balazs Kotosz, University of Szeged, Hungary Jan Kramoliš, Tomas Bata University in Zlin, Czech Republic Zygmunt Kruczek, University School of Physical Education, Poland – Krakow Vladimíra Kučerová, Brno University of Technology, Faculty of Business and Mangement, Czech Republic Tatiana Kudryavtseva, Peter the Great Saint- Petersburg Polytechnic University, Russia Saibal Kumar Pal, University DRDO, India Georgiana-Raluca Lădaru, The Bucharest University of Economic Studies, Romania Arij Lahmar, Faculty of Economics and Management of Sfax, Tunisia Deborah Lamont, Cardiff Metropolitan University, UK Daniel Lang, Telecom Business School, France Leila Lefi Hajlaoui, CBE Qassim University, KSA Cristina Leovaridis, National University of Political Studies and Public Administration, Romania Beatrice Leustean, University ”Politehnica” of Bucharest, Romania Ioana – Ruxandra Lie, The Bucharest University of Economic Studies, Romania Lew Sook Ling, Multimedia University, Malaysia Hsu Kuan Liu, I-Shou University, Taiwan Jan Luhan, Brno University of Technology, Czech Republic Jiří Luňáček, Brno University of Technology, faculty of Business and Management, Czech Republic Houari Maaradj, University of Ghardaia, Algeria Cristina Măcărescu, Bucharest Academy of Economics, Romania Pedro Maia Malta, Lusófona University, Portugal Ingrid Majerová, Silesian University in Opava, Czech Republic Lukáš Malec, University of Business in Prague, Czech Republic Mohammad Malkawi, Jordan University of Science & Technology, Jordan Liliana Manea, University Valahia, Romania Elena Otilia P. Manta, Şcoala De Studii Avansate A Academiei Române, Romania Nasina Mat Desa, Universiti Sains Malaysia, Malaysia Jana Matošková, Tomas Bata University in Zlín, Czech Republic Florian Marcel Nuţă, Danubius University from Galaţi, Romania António Eduardo Martins, Universidade Aberta, Portugal Miloš Maryška, University of Economics, Prague, Czech Republic VII Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Maslin Masrom, Universiti Teknologi Malaysia, Malaysia Tendani Mawela, Univ. of Pretoria, South Africa Valentin Măzăreanu, AL.I.Cuza University of Iasi, Romania Traian Mazilu, University Politehnica of Bucharest, Romania Noraina Mazuin Sapuan, Universiti Tenaga Nasional, Malaysia Aminah Md Yusof, Universiti Teknologi Malaysia, Malaysia Seifeddine Mechti, UniversityISG Tunis, Tunisia Camelia Catalina Mihalciuc, Stefan cel Mare University Suceava, Romania Leila Mohamed Jamel Menzli, PNU- University, KSA Francesca Michelino, University of Salerno, Italy Cristian Orzan Mihai, Economic Studies University of Bucharest, Romania František Milichovský, Brno University of Technology, Faculty of Business and management, Czech Republic Marinela Mircea, The Bucharest University of Economic Studies, Romania Ionela Mituko Vlad, University U.A.S.V.M. of Bucharest, Romania Samali V. Mlay, Makerere University Business School, Uganda Andrei-Horia Mogos, University Politehnica of Bucharest, Romania Bianca Mogoş, University of Bucharest, Romania Mohammad Atallah Moh’d AlOudat, University of Bridgeport, USA Norshidah Mohamed, Prince Sultan University, KSA Mohammad Mohammad, University of Western Sydney, Australia Norizan Mohd Kassim, King Abdulaziz University, Jeddah, Saudi Arabia Roziah Mohd Rasdi, Universiti Putra Malaysia, Malaysia Norazah Mohd Suki, Universiti Malaysia Sabah, Malaysia Anikó Molnárová, Brno University of Technology, Czech republic Blanca Moreno Cuartas, University Oviedo, Spain Ntebogang Dinah Moroke, North West University, South Africa Lucia Morosan-Danila, University “Stefan cel Mare” Suceava, Romania Miroslaw Moroz, Wroclaw University of Economics, Poland Gianmmario Motta, Università di Pavia, Italy Joriah Muhammad, Universiti Sains Malaysia, Malaysia Carrington Mugove Mukwasi, University of Cape Town, South Africa Mihaela-Carmen Muntean, “Dunarea de Jos” University of Galati, Romania Andreea-Clara Munteanu, Romanian Academy Institute of National Economy, Romania Leonid Mylnikov, Perm National Research Polytechnic, Russia Manel Najar, Université de Tunis El Manar, Tunisia Zina Nakhla, Universté de Tunis, Tunisia Fatiha Naoui-Outini, La Rochelle Business School, France Josef Navrátil, University of South Bohemia, Czech Republic Ana-Maria Neagu, University Politehnica of Bucharest, Romania Cornelia Neagu, University Center for Industry and Services Economics, Romanian Academy, Bucharest, Romania Mihaela Neculita, University Dunarea De Jos, Romania Zuzana Němcová, Brno University of Technology, Faculty of Business and Management, Czech Republic Andrei Stefan Nestian, University Alexandru Ioan Cuza, Romania Bernard Neuwirth, Brno University of Technology, Czech Republic Simona Nicolae, University Politehnica of Bucharest, Romania Maria-Loredana Nicolescu (Popescu), Nicolae Titulescu University, Bucharest, Romania Husam-Aldin Nizar Al-Malkawi, ALHOSN University- Abu Dhabi, UAE Michal Novák, University of Economics, Faculty of Management, Prague, Czech Republic Duncan Momanyi Nyang’ara, Chuka University, Kenya Dumitru-Cristian Oanea, The Bucharest University of Economic Studies, Romania Isaiah Oluranti Olurinola, Covenant University, Nigeria Adegbuyi Omotayo, Covenant University, Ota, Nigeria Amina Omrane, University of Sfax, Tunisia VIII Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Evans Osabuohien, Covenant University, Nigeria Ismah Osman, Universiti Teknologi MARA, Malaysia Wan Nadzri Osman, Universiti Utara Malaysia, Malaysia Tereza Otčenášková, University of Hradec Králové, Czech Republic Faezah Othman, Multimedia University, Malaysia Mysoon A Otoum, Higher Colleges of Technology, UAE Wided Oueslati, University of Tunis, Tunisia Rachid Oumlil, ENCG-Agadir- Ibnou Zohr, Morocco Siew Hock Ow, University of Malaya, Malaysia Mirela Panait, Petroleum and Gas University of Ploiesti, Romania Leontina Pavaloaia, ”Alexandru Ioan Cuza” University of Iasi, Romania Vasile-Daniel Pavaloaia, AL.I.Cuza University Of Iasi, Romania Ionela Carmen Pirnea, Constantin Brancoveanu University Rm.Valcea, Romania Adina Simona Popa, “Eftimie Murgu” of Resita, Romania Ion Popa, The Bucharest University of Economic Studies, Romania Raluca Andreea Popa, Bucharest University of Economic Studies, Romania Agatha Popescu, University of Agricultural Sciences and Veterinary Medicine Bucharest, Romania Veronica Adriana A. V. Popescu, The Bucharest University of Economic Studies, Bucharest, Romania (Faculty of Accounting and Management Information) and The Commercial Academy Satu-Mare, SatuMare, Romania Catalin Popescu, Petroleum-Gas University of Ploiesti, Romania Doina I. Popescu, Bucharest University of Economic Studies, Romania Ionela-Valeria Popescu, The Bucharest University of Economic Studies, Romania Luminita Gabriela Popescu, National University of Political and Administrative Studies, Romania Daniela Popescul, Alexandru Ioan Cuza University, Romania Gabriela Prelipcean, “Stefan cel Mare” University of Suceava, Romania Marjene Rabah Gana, University IHEC Carthage, Tunisia Olimpia C. Racela, Mahasarakham University, Thailand Tomasz Rachwał, Pedagogical University of Cracow, Poland Gita Radhakrishna, Multimedia University, Malaysia Nicoleta Radneantu, Romanian-American University, Romania Joanna Radomska, Wrocław University of Economics, Poland Laura-Diana Radu, Alexandru Ioan Cuza University Iasi, Romania Wided Ragmoun, Qassim University, Saudi Arabia Abdul Razak Rahmat, Universiti Utara Malaysia, Malaysia Nasrin Rahmati, University Dar Al-Hekma, KSA Jakub Rak, Tomas Bata University in Zlín, Czech Republic Vidhya Ramaswamy, International Centre for Intellectual Training & Empowerment (INCITE), India T. Ramayah, Universiti Sains Malaysia, Malaysia Martina Rasticova, Mendel University in Brno, Czech Republic Petr Řeháček, VŠB-Technical University of Ostrava, Czech Republic Hugo Rehesaar, Griffith University, Australia Raquel Reis Soares, Universidade Europeia – Laureate International Universities, Portugal Paolo Renna, University of Basilicata, Italy Janet Renwick, University of Arkansas – Fort Smith, USA Leo Tadeu Robles, Federal University of Maranhao – UFMA, Brazil Ioan-Bogdan Robu, Alexandru Ioan Cuza University of Iasi, Romania Luis Silva Rodrigues, ISCAP/Instituto Politécnico do Porto, Portugal Angela Roman, ”Alexandru Ioan Cuza” University of Iasi, Romania Simona Rus, University Politehnica, Romania Adam Ryszko, Silesian University of Technology, Poland Camille Salinesi, University Sorbonne, France Mad Ithnin Salleh, Sultan Idris Education University, Malaysia Cristina Santandreu Mascarell, Universitat Politècnica de València, Valencia-España Daria Sarti, University Florence, Italy IX Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Innovation and Sustainable Economic Competitive Advantage: From Regional Development to Global Growth Michał Sąsiadek, University of Zielona Góra, Poland Hana Scholleová, Czech Technical University in Prague, Czech Republic David Schüller, Brno University of Technology, Faculty of Business, Czech Republic Barbara Scozzi, University Politecnico di Bari, Italy Liliana Scutaru, “Stefan cel Mare” University of Suceava, Romania Tey Lian Seng, University of Malaya, Malaysia Andreea Claudia Serban, The Bucharest University of Economic Studies, Romania Sujeet Kumar Sharma, Sultan Qaboos University, Oman Cândida Silva, Polytechnic Institute of Oporto (IPP – ESEIG), Portugal Violeta Sima, Petroleum-Gas University of Ploieşti, Romania Iveta Simberova, Brno University of Technology, Czech Republic Liliana Nicoleta Simionescu, Bucharest University of Economic Studies, Romania Teh Sin Yin, Universiti Sains Malaysia, Malaysia Nicoleta Sîrghi, West University Timisoara, Romania Aziza Saïda Slimane, University of Sousse, Tunisia Marian Socoliuc, University: Stefan cel Mare Suceava, Suceava Petr Sodomka, Brno University of Technology, Czech Republic Costin Octavian Sorici, OVIDIUS University of Constanta, Romania Ivan Soukal, University of Hradec Kralove, Czech Republic Rym Srarfi Tabbane, University Manouba, Tunisia Anongnart Srivihok, Kasetsart University, Thailand Elena Roxana Stan, Romanian-American University, Romania Mihaela Roberta Stanef-Puica, Academy of Economic Studies, Bucharest, Romania Simona Cătălina Ștefan, The Bucharest University of Economic Studies, Romania Jan Stejskal, University of Pardubice, Czech Republic Bourliataux-Lajoinie Stephane, IAE de Tours, France Roxana Stoian, Bucharest University of Economic Studies, Romania Christophe Storai, University of Corsica, France Mihaela Andreea Stroe, University Nicolae Titulescu, Romania Marta-Christina Suciu, Bucharest University of Economic Studies (ASE Bucuresti), Romania Ainin Sulaiman, University Malaya, Malaysia Dalia Susniene, Kaunas University of Technology, Lithuania Tereza Šustrová, University FBM BUT BRNO, Czech Republic Ştefăniţă Şuşu, “Ştefan cel Mare” University of Suceava, Romania Eva Svirakova, Tomas Bata University in Zlín, Czech Republic Libuše Svobodová, University of Hradec Králové, Czech Republic Faisal Syafar, Universitas Negeri Makassar, Indonesia Jessica Sze Yin Ho, Sunway University Business School, Malaysia Nouha Taifi, Ecole Mohammdia d’Ingénieurs – Université Mohammed V, Morocco Choo-Kim Tan, Multimedia University, Malaysia Olivia Tan Swee Leng, Multimedia University, Cyberjaya, Malaysia Pavel Taraba, Tomas Bata University in Zlin, Czech Republic Rosmaini Tasmin, UTHM, Malaysia Petra Taušl Procházková, University of West Bohemia, Czech Republic Derek Ong Lai Teik, Sunway University, Malaysia Seethaletchumy Thambiah, Multimedia University, Malaysia Brychan Thomas, University of South Wales, UK Mohamed Hussain Thowfeek, South Eastern University of Sri Lanka, Sri Lanka Ioana Laura Tibulca, Bucharest University of Economic Studies, Romania Cristiana Tindeche, University of Agricultural Sciences and Veterinary Medicine Bucharest, Romania Ding Hooi Ting, Universiti Teknologi Petronas, Malaysia Kateryna Tiulkina, Odessa State Environmental University, Ukraine Teresa Torres-Coronas, Universitat Rovira i Virgili, Spain Amira Trabelsi Zoghlami, University of Carthage, Tunisia Alexandru Trifu, University “Petre Andrei” of Iasi, Romania X Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 An Empirical Analysis of Causal Relationship between Stock Prices and Real Sector of the Pakistani Economy Rizwan Raheem Ahmed, Indus University, Karachi, Pakistan, rizwanraheemahmed@gmail.com Jolita Vveinhardt, Vytautas Magnus University, Kaunas, Lithuania, jolitaw@gmail.com Yaseen Ahmed Meenai, Institute of Business Administration (IBA), Karachi, Pakistan, ymeenai@gmail.com Abstract This paper determines the causal relationship between stock prices and the macroeconomic variables representing the real sector of the Pakistani economy. In order to substantiate the purpose annual data has been acquired from the websites of State Bank of Pakistan and Federal Bureau of Statistics, from the period of 1979 to 2013. Further to get the results Unit Root, Cointegration, Error correction model has been applied. Which indicate the presence of long term relation between stock prices and macroeconomic variables including gross domestic product (GDP), Consumption and Investment. Moreover, the result shows the existence of one-way causation between macroeconomic variables such as GDP, real consumption expenditure, and real investment expenditure. This one-way causation lead to the conclusion that the stock market of Pakistan is not developed to that extinct where it could influence GDP, real consumption expenditure, and real investment expenditure. Therefore, it is finally concluded that the stock market of Pakistan is not a leading indicator of any activity of economy. Keywords: Macroeconomic variables, Stock Prices, Causal Relationship, Pakistani Economy. Subject classification codes: E44, G1 Introduction Background of the research The stock market plays an important role in the important in the case of developing countries in view of economy by mobilizing domestic resources and the various economic reforms taking place there (Ahmed et al. 2012). Also, the stock market plays an important role in the economy by mobilizing domestic resources and channeling them to productive investment. This implies that it must have a significant relationship with the economy. The relationship can be seen in two ways - The first relationship views the stock market as the leading indicator of the economic activity in the country whereas the second focuses on the possible impact the stock market may have on aggregate demand particularly through aggregate consumption and investment (Ahmed et al. 2013). According to Ahmed (1999), the knowledge of the prevailing relationship between stock prices on the one hand and macroeconomic variables like consumption, investment, industrial production, GDP and the like on the other, is predominantly important in view of the fact that a stable relationship among these variables is likely to form an important postulate in a variety of economic models. Sohail and Hussain (2009) maintain that the well-organized stock market mobilizes the savings and activates the investment projects, which lead to economic activities in a country. The key function of stock market is to act as mediator between savers and borrowers. It mobilizes savings from a large pool of small savers and channelizes these funds into fruitful investments. Pakistan stock market is one of the highest volatile stock market and has been in such a position from past 7 years. The financial crises started in Pakistan stock market from 2005 when it was first crashed, following a second crash in 2006. Then the third, a crash with more serious intensity was observed in 2008, which continued until 2009. This crash in stock market occurred with such a high density that it cause the Karachi stock index of Pakistan to drop by 10,000 were as a drop of 3000 points was observed Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 in Lahore stock exchange (Sohail, Hussain 2009). Despite of these downfalls in the stock market, there are also times when it has flourished. For instance Karachi stock exchange was declared by business week as one of the stocks, which is performing best in the world. Further, in 2012 due to relaxation provided to foreign investors along with privatization initiative has caused increase in the Karachi stock exchange development (Ahmed et al. 2013). Observing the fact the stock prices fall before the economy of a country tumble or goes into downfall, similarly the stock price increases before the boom in the economy. This back and forth movement of stock price in harmony with economy indicates the presence of a significant relation between stock prices and economy (Grossman, Stiglitz 1980; Levine, Sara 1996). This relationship between stock prices and economy can be examined in two ways. First, we could say that this relationship causes stock market to be viewed as an indicator of economy. Secondly, this relationship create the possibility to explore a new dimension in research relating to the impact of stock market prices on aggregate demand indirectly by first effecting aggregate consumption and investment (Levine 1991; Gunasinghe 2005). In other words, fluctuations in Gross Domestic Product (GDP), Consumption and Investment Spending representing macroeconomic variable of the economy is due to changes in stock market. The issue that whether changes in stock market prices increases or decreases activity of economy which further effects the policy-making institution in developing economic reforms. Therefore, researchers in both developed and developing countries have diverted their focus towards exploring this dimension of the relation (Levine, Sara 1998; Chakraborty 2006; Ahmed et al. 2014). Role of the stock market in economic development The significance regarding studying stock market comes from the role it play in the economic development of a country. There are various researchers, which second the role, which stock market plays in the economic development of a country. For instance, according to some researchers liquidity creates economic development by affecting the stock market (Khan et al. 2005). Many individual investors and companies prefer to invest in liquid market as it help them to take less risk by not holding their investment in one security for a longer period of time and sell their securities quickly in need of time, Thus enabling them to raise capital on their own set terms. Thus, by enabling their holder to enjoy profits quickly, liquid market improve capital allocation and boost the prospect of long-term economic growth (Bosworth 1975; Schaub 2013). Secondly supporting argument of the impact of stock prices on economic development of a country comes from “wealth effect”. Wealth effect model explain the expectation that individual have towards the economic activities of the country. Further wealth effect by strengthening the fact that stock prices cause real economy variation; effect the economic development of the country (Holmstro, Tirole 1993; Yartey 2007). Macro economic variables The macroeconomic variables included in the study, identified from the literature to have an unclear effect on stock prices include Gross domestic product, consumption expenditure, investment spending. Making the casual relation between stock prices and identified macroeconomic variable not conclusive. Making these variables relation an interesting phenomena to be further studied. Gross domestic product GDP growth rate is a macroeconomic variable that measure the economic performance of a country. As GDP has an impact of many economic variables such as CPI, unemployment rate therefore researchers, econometricians, policy makers associate many economic variables with GDP. Similarly, GDP is more often associated with stock prices with an assumption that an increase in GDP growth will result in higher stock prices. As it is generally observe that if a country has high GDP growth then this high GDP allow companies to earn more profits thus increasing their stock prices (Lucas 1988; Iqbal 2012). For instance Mishra (2004) and Mookerjee (1988) found that increase in GDP has Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 a positive impact on stock prices. Whereas on the contrary it is also observed that high GDP growth rate has result in lower stock prices or have found a weak correlation between the two variables (Anderson et al. 2012). Thus examine the cause and effect relation of GDP and Stock price, is an interesting phenomena that is worth studying (Nishat, Saghir 1991; Mankiw et al. 1992). Real consumption expenditure Keynes was the pioneer in identification of the cause and effect relation between stock prices and consumption expenditure. According to Keynes an increase in the value of asset held by individual, increase their capability of consumption, thus an expansion in the stock market prices cause a further expansion in the consumption expenditure of individuals (Fama 1970; Ford et al. 2012). Further support for the relation comes from the life cycle theory. The life cycle theory states that the consumption expenditure of individuals depends on the expected value of the lifetime accumulated wealth. This wealth accumulated is kept in many forms, one of the forms is stock, thus when the prices of stock increase more money are available to individuals to consume (Fama 1998; Zhang & Wihlborg 2010). Real investment spending Investment spending is the saving of people, a part of the income earned which is invested in the economy. Mobarek et al. (2008) examine relation between real investment spending and stock prices. According to the Tobins q theory organization when a company or stock aggregate value (refered as market capitalization) is greater then the amount of replacing an asset of a firm at current price (refered as replacement cost), in this case the organization market value is higher then the capital of new fixed assets aquired. In such cases firms issue new stocks at a higher prices, which enable them to receive more amount then what they have paid on fixed assets. This increase in the market value of the firm, indicating that if a firm issue more stocks, enabling them to get hold of more money, further increase the invesment spending of the firm. Concuding that higher the stock prices, higher will be q, more will be the invesment expenditure and viceversa (Maghyereh 2006). Problem of research Movements of stock prices represent an important area for the researchers to be studied as it can be considered as a pulse of any country economy. It indicates the current and future opportunities of a country. The movement in the stocks prices of a country is mainly due to the economic environment of variables. This economic environment is composed of micro and macro-economic variables. As it is generally assumed that micro economic variable does not represent a larger effect on stock prices whereas on the other hand variables of macro economy representing real sector of economy, due to globalization and integration can be presumed to have definite cause and effect relation. There are many previous studies measuring the causal relation between macroeconomic variable (Serra 2003; Gunasekarage et al. 2004; Guidi et al. 2011). Level of problem exploration A fairly large number of research papers on issues of stock market show the timeliness and importance of this topic (Fama 1965; Baumol 1965; Fama 1970; Bosworth 1975; Grossman, Stiglitz 1980; Errunza, Losq 1987; Mookerjee 1988; Fama 1998; Ahmed 1999; Sohail, Hussain 2009; Ali et al. 2010; Al-Obaid 2011; Ahmed et al. 2012; Ahmed et al. 2013; etc.). Fama (1998), analysing market efficiency, argues that the recent finance literature seems to produce many long-term return anomalies. Subjected to scrutiny, however, the evidence does not suggest that market efficiency should be abandoned. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent overreaction of stock prices to information is about as common as underreaction. And post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. According to Fama (1998), most important, the long-term return anomalies are fragile. They tend to disappear with reasonable changes in the way they are measured. Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Objective of the research The causal relation between stock prices and real sector of Pakistan economy The aim of the research The aim is determine the causal relation between stock prices and real sector of Pakistan economy. In order to substantiate the purpose the task are as follow: 1. 2. 3. To identify the macroeconomic variables representing the real sector of economy. To determine the causal relation between macroeconomic variables representing real sector and stock prices. To determine direction of causation between real sector of economy and stock prices. Data and Methodology In order to justify the purpose of the study, data has been collected from the official website of the State Bank of Pakistan and Federal Bureau of Statistics. On these official websites annual reports, economic survey was reviewed from the period of 1979 to 2013. The data collected is divided into two parts one representing the pre liberalization period while other representing post liberalization period. To incorporate this a dummy variable has been used. This dummy variable examines the impact of changing economic reforms on the examined relation. The dimensions of real sector of the economy identified from the literature (Fama 1965; Ahmed 1999; Husain, Mahmood 2001), included in the study are Gross domestic product, Investment expenditure, Consumption expenditure. Results and discussion The descriptive statistics show (Table 1) that average return on the stock from the period 1979 to 2013 is around 9.23%, similarly the average GDP with in the similar period is 5.24%, were as consumption is 4.75% and real investment spending is 5.21%. Standard deviation given in the above table show that on average stock prices deviate from its mean by 23.98%, GDP deviate by 2.11, consumption by 4.19% and lastly investment by 6.28%. Apart from mean and standard deviation, form looking at above table, one could examine the increase or decrease in the value of real economy variable for instance GDP fall from 5.98% to 4.15%, similarly consumption decrease by 1.07% and finally investment decrease by 4.14%. Table 1: Descriptive Statistics for Growth in Stock Prices and Macro Variables Stock Real Real Real Prices GDP Consumption Investment Full Sample: 1979/80 - 2012/13 Mean 0.0923 0.0524 0.0475 0.0521 Std. Dev. 0.2398 0.0211 0.0419 0.0628 Observations 33 33 33 33 Mean Std. Dev. Observations Pre-liberalization: 1979/80 - 1990/91 0.0851 0.0589 0.0498 0.1538 0.0270 0.0328 11 11 11 0.0612 0.0729 11 Post-liberalization: 1991/92 - 2012/13 Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 Mean Std. Dev. Observations 0.1027 0.3594 22 0.0415 0.0821 22 0.0391 0.0483 22 Equality of Means and Variances Mean (t0.39 2.88** 0.75 value) Variance (F 6.16*** 1.38 1.04 value) Source Authors’ estimation 0.0198 0.0468 22 1.86 2.52 The Table 2 shows that correlation between the stock prices and real variable of the economy representing Consumption and GDP is low, however GDP has a high correlation with stock prices. Table 2: Correlation Coefficients b/w Stock Prices and Macro variables Variables 1979-80 1979-80 1991/92 2012/13 1990/91 2012/13 Changes in Real Consumption -0.028 -0.201 0.081 Changes in Real Investment 0.048 -0.023 0.157 Changes in Real GDP 0.211 -0.069 0.613** Source Authors’ estimation In order to test stationarity, unit root test is applied, Table 3 shows that when stationarity test was applied on with trend and without trend at level, the value is not more negative than the critical value thus we fail to reject Ho. This indicates the presence of unit root in all the four variable namely stock prices, real GDP, real consumption and real investment both with and without trend. Thus unit root test was again tested at first difference, as the above table indicate the values are more negative then critical value thus Ho is rejected indicated absence of unit root, which further project that all the variables are integrated of order I(I). Variables Stock Prices Real GDP Real Consumption Real Investment Source Authors’ estimation Tables 3: Unit Root Tests (ADF) for variables Levels First Differences W/O W. Trend W/O Trend W. Trend Trend 0.411 -2.122 -4.019*** -3.919** -2.291 -0.911 -4.171*** -6.901*** -0.801 -0.577 -6.019*** -6.759*** -0.870 -1.711 -4.373*** -4.374*** As all the variables are integrated of order I(I) thus cointegration test is applied in the next step (Table 4). As the value of t-statistics is more negative than the critical values, thus Ho is rejected indicating a significant long run relation between stock prices and real economy variable namely GDP, Consumption and Investment. Table 4: Co-integrating Regressions Regressions Constant Coefficients ADF GDP on SP 8.989*** 0.599*** -2.231** Cons on SP 9.998*** 0.494*** -2.112** Inv on SP 8.980*** 0.551*** -2.321** Source Authors’ estimation Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain ISBN: 978-0-9860419-5-2 According to Fama (1998) after cointegration test, Error correction model is applied to determine the causality between stock prices and real economy variables (Table 5). As the error term significant, it shows long run relationship between GDP, consumption, investment and Stock returns. e(-1) DSP(-1) DGDP(-1) F-value e(-1) DSP(-1) DCS(-1) F-value e(-1) DSP(-1) DIN(-1) F-value Source Authors’ estimation Table 5: Error Correction Models Real GDP DSP -0.195** -0.170 -0.525 1.521 Real Consumption DSP -0.278** -0.078 0.389 1.285 Real Investment DSP -0.278** -0.089 0.069 1.885 DGDP -0.027 0.008 0.188 0.498 DCS 0.027 0.054 -0.083 0.583 DIN 0.033 0.048 0.187 0.896 Shift in stock prices and real variable To further incorporate the effect of shit in the variable dummy variable has been used, Table 6 shows that dummy variable is insignificant thus indicating that the stock prices and macroeconomic variable of economy including GDP, Consumption and Spending causal relation is not effected by liberalization, indication that the effect is same for all pre and post liberalization. Table 6: Co-integrating Regressions including Shift in Variables Regressions Constant Dummy Coefficients ADF GDP on SP 8.929*** -0.134 0.710*** -2.153** Cons on SP 9.623*** -0.148 0.684*** -2.327** Inv on SP 9.121*** -0.168 0.598*** -3.234** Source Authors’ estimation As again the error term significant, results are depicted in Table 7, it further predicts a long run relationship between GDP, consumption, investment and Stock returns. D e(-1) DSP(-1) DGDP(-1) F-value Table 7: Error Correction Models Real GDP DSP -0.005 -0.335*** -0.168 -1.376 2.732 Proceedings of 26th IBIMA2015 Conference, 11th-12th November 2015, Madrid, Spain DGDP -0.035 -0.038 0.023 -0.243 2.831 ISBN: 978-0-9860419-5-2 D e(-1) DSP(-1) DCS(-1) F-value D e(-1) DSP(-1) DIN(-1) F-value Source Authors’ estimation Real Consumption DSP 0.041 -0.318*** -0.239 0.419 2.329 Real Investment DSP 0.089 -0.801*** -0.581 0.023 2.796 DCS -0.022 0.024 0.049 -0.081 0.724 DIN -0.038 0.034 0.098 0.241 1.921 Conclusions The result of the study indicates the presence of a long-term relation between the stock prices and macroeconomic variables taken into account namely GDP, consumption and investment. Apart from presence of long term relation the result help determine the direction of causality which with the help of result is identified as uni-directional, which indicate that movement in the stock prices is due to movement in accounted variable of real sector of the economy. Further the incorporation of dummy variable did not prove to be useful as the result were same even after incorporation of variation caused by liberalization. All these results lead to the conclusion that the stock market of Pakistan is not developed to that extinct where it could influence GDP, real consumption expenditure, and real investment expenditure. Therefore, the stock market of Pakistan is not a leading indicator of any activity of economy. Thus it could be recommended that policy institution if want changes in stock prices one way to achieve this objective is through influencing real economy variable which include GDP, consumption and Investment. 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