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Macroeconomic variables and the Malaysian equity market: A view through rolling subsamples

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  • Mansor H. Ibrahim
  • Hassanuddeen Aziz

Abstract

Analyzes dynamic linkages between stock prices and four macroeconomic variables for the case of Malaysia using standard and well-accepted methods of cointegration and vector autoregression. Empirical results suggest the presence of a long-run relationship between these variables and the stock prices and substantial short-run interactions among them. In particular, documents positive short-run and long-run relationships between the stock prices and two macroeconomic variables. The exchange rate, however, is negatively associated with the stock prices. For the money supply, documents immediate positive liquidity effects and negative long-run effects of money supply expansion on the stock prices. Also notes the predictive role of the stock prices for the macroeconomic variables. However, there seems to be irregularity in the data when observations from the recent crisis are included. Finally, documents the disappearance of the immediate positive liquidity effects of the money supply shocks and unstable interactions between the stock prices and the exchange rate over time.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 30 (2003)
Issue (Month): 1 (January)
Pages: 6-27

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Handle: RePEc:eme:jespps:v:30:y:2003:i:1:p:6-27

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Keywords: Macroeconomics; Malaysia; Stock prices; Variable costs;

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Cited by:
  1. Tang, Chor Foon & Lai, Yew Wah, 2011. "The Stability of Export-led Growth Hypothesis: Evidence from Asia's Four Little Dragons," MPRA Paper 27962, University Library of Munich, Germany.
  2. Liang, Chin-Chia & Lin, Jeng-Bau & Hsu, Hao-Cheng, 2013. "Reexamining the relationships between stock prices and exchange rates in ASEAN-5 using panel Granger causality approach," Economic Modelling, Elsevier, vol. 32(C), pages 560-563.
  3. Mansor H. Ibrahim & Muzafar Shah Habibullah, 2010. "Stock market and aggregate consumption asymmetry: evidence from Malaysia," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(1), pages 19-29, March.
  4. Rashid, Abdul, 2008. "Macroeconomic Variables and Stock Market Performance: Testing for Dynamic Linkages with a Known Structural Break," MPRA Paper 26937, University Library of Munich, Germany.
  5. Tsai, I-Chun, 2012. "The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 609-621.
  6. Buerhan Saiti & Azlan Ali & Naziruddin Abdullah & Sulaiman Sajilan, 2014. "Palm Oil Price, Exchange Rate, and Stock Market: A Wavelet Analysis on the Malaysian Market," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(1), pages 13-27.
  7. Theophano Patra & Sunil Poshakwale, 2006. "Economic variables and stock market returns: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 993-1005.
  8. Chancharat,Surachai & Valadkhani, Abbas, 2007. "An Empirical Analysis of the Thai and Major International Stock Markets," Economics Working Papers wp07-13, School of Economics, University of Wollongong, NSW, Australia.
  9. Asmy, Mohamed & Rohilina, Wisam & Hassama, Aris & Fouad, Md., 2009. "Effects of Macroeconomic Variables on Stock Prices in Malaysia: An Approach of Error Correction Model," MPRA Paper 20970, University Library of Munich, Germany.
  10. Kabir, Sarkar Humayun & Masih, Mansur, 2014. "Dynamic Integration of Domestic Equity Price, Foreign Equity Price and Macroeconomic Indicators: Evidence from Malaysia," MPRA Paper 57007, University Library of Munich, Germany.
  11. Abdulnasser Hatemi-J, 2012. "Asymmetric causality tests with an application," Empirical Economics, Springer, vol. 43(1), pages 447-456, August.
  12. Faris Nasif AL-Shubiri, 2013. "Analysis Of The Relationship Between Economic Forces And Abnormal Stock Return: Empirical Evidence," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 8(1), pages 7-15, December.
  13. Tang, Chor Foon, 2011. "Tourism, real output and real effective exchange rate in Malaysia: a view from rolling sub-samples," MPRA Paper 29379, University Library of Munich, Germany.
  14. Albaity, Mohamed Shikh, 2011. "Impact of the monetary policy instruments on Islamic stock market index return," Economics Discussion Papers 2011-26, Kiel Institute for the World Economy.

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