The purpose of this study is to provide empirical evidence on the effect of institutional quality on stock market performance. In order to evaluate the effect of institutional quality on stock market performance, Calderon Rossell models have been estimated using generalized method of moment’s technique. A panel data of 41 emerging countries for the period 1996 to 2011 is used to estimate the results. The results suggest that institutional quality has a positive and significant influence on stock market performance. Policy makers in emerging countries must follow a parallel policy agenda of improving the quality of their institutions as well as education. These are paramount to the performance of stock markets performance in emerging countries.
Key words: institutional quality, stock market, emerging economies, macroeconomic variables.
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