This study examines the causes of stock market development in Jordan. The study uses monthly data between 1990 and 2011. The data is tested for stationarity by employing unit root tests. Results confirm that all variables are stationary, enabling us to continue in the modeling process. To achieve this objective, a multivariate cointegration and variance decomposition analysis are applied to examine the impact of these sources. The estimated findings demonstrate that the variables namely; Money Supply relative to, Total Value Traded relative to , Gross Capital Formation relative to , Consumer Price Index (CPI), and Credit to private Sector relative to ?all have positive and considerable influences on stock market development. On the other hand, Nominal Gross Domestic Product and Net Remittances relative to ?have a negative impact. From the estimated VECM, the variance decompositions (VDC) have been simulated as a basis for inferences. The Johansen and Juselius’ multivariate cointegration and variance decompositions analysis also confirm the presence of both a long-term and short-term dynamic relationship between the Stock market capitalization relative to GDP and macroeconomic variables. In the light of these results, the paper provides some policy implications to Jordan.
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