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Bivariate Causality Between Exchange Rates And Stock Prices In Malaysia

Author

Listed:
  • Mohd Fahmi Ghazali
  • Wahi Ismail
  • Mohd Rushdan Yasoa
  • Nelson Lajuni

Abstract

The main purpose of this paper is to examine the relationship between stock prices and exchange rates in Malaysia. This research considers high-frequency data of USD-MYR exchange rates and Kuala Lumpur Composite Index (KLSE) from July 22, 2005 to March 23, 2007, which is the period when the MYR was unpegged. The Johansen cointegration method suggests that there is no long-run equilibrium relationship between these two financial variables. Both Engle Granger and Toda-Yamamoto causality tests find that there is uni-directional causality running from stock prices to exchange rates.

Suggested Citation

  • Mohd Fahmi Ghazali & Wahi Ismail & Mohd Rushdan Yasoa & Nelson Lajuni, 2008. "Bivariate Causality Between Exchange Rates And Stock Prices In Malaysia," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 2(1), pages 53-59.
    • Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:53-59
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    Citations

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    Cited by:

    1. Long, Shaobo & Zhang, Rui & Hao, Jing, 2022. "Asymmetric impact of Sino-US interest rate differentials and economic policy uncertainty ratio on RMB exchange rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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