IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/101190.html
   My bibliography  Save this paper

Is islamic stock related to interest rate ? Malaysian evidence

Author

Listed:
  • Abu Bakar, Norhidayah
  • Masih, Mansur

Abstract

This study aims to examine the dynamic relationship of Islamic stock price with interest rate and other monetary policy variables by using the standard time series approach. The main objective is to test the Islamic principle whether interest rate (or riba in Islamic term) influences the movement of Islamic stock price. Malaysia is taken as a case study. In addition, the extent of the influence of other variables namely, money supply and inflation in explaining Islamic stock return could be captured. The findings tend to suggest that Islamic stock price appears to be significantly affected by the interest rate and inflation in the long run, but insignificantly affected by broad money supply. Islamic stock price is relatively more sensitive to inflation rate, compared to other variables. The finding implies that Islamic stock is a good hedge against inflation as it tends to react positively to inflation rates

Suggested Citation

  • Abu Bakar, Norhidayah & Masih, Mansur, 2016. "Is islamic stock related to interest rate ? Malaysian evidence," MPRA Paper 101190, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101190
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/101190/1/MPRA_paper_101190.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Masih, Mansur & Algahtani, Ibrahim, 2008. "Estimation of Long-run Demand for Money: An Application of Long-run Structural Modelling to Saudi Arabia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 61(1), pages 81-99.
    4. Mansor H. Ibrahim & Hassanuddeen Aziz, 2003. "Macroeconomic variables and the Malaysian equity market: A view through rolling subsamples," Journal of Economic Studies, Emerald Group Publishing, vol. 30(1), pages 6-27, January.
    5. Mansur Masih & Ali Al-Elg & Haider Madani, 2009. "Causality between financial development and economic growth: an application of vector error correction and variance decomposition methods to Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1691-1699.
    6. Maysami, Ramin Cooper & Koh, Tiong Sim, 2000. "A vector error correction model of the Singapore stock market," International Review of Economics & Finance, Elsevier, vol. 9(1), pages 79-96, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chu, Patrick Kuok-Kun, 2011. "Relationship between macroeconomic variables and net asset values (NAV) of equity funds: Cointegration evidence and vector error correction model of the Hong Kong Mandatory Provident Funds (MPFs)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 792-810.
    2. Najeeb, Faiq & Masih, Mansur, 2016. "Macroeconomic variables and stock returns: evidence from Singapore," MPRA Paper 98778, University Library of Munich, Germany.
    3. Kalthum, Ummi & Masih, Mansur, 2017. "The lead-lag relationship between PPI, CPI and oil price: Malaysian evidence," MPRA Paper 108011, University Library of Munich, Germany.
    4. Mohammad Joarder & Monir Ahmed & Tahsina Haque & Syed Hasanuzzaman, 2014. "An empirical testing of informational efficiency in Bangladesh capital market," Economic Change and Restructuring, Springer, vol. 47(1), pages 63-87, February.
    5. Naushad Alam, 2017. "Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 119-127, March.
    6. Mohamed, Hazik & Masih, Mansur, 2017. "Stock market comovement among the ASEAN-5 : a causality analysis," MPRA Paper 98781, University Library of Munich, Germany.
    7. Roberto Cellini & Tiziana Cuccia, 2013. "Museum and monument attendance and tourism flow: a time series analysis approach," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3473-3482, August.
    8. 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.
    9. 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.
    10. Alexander Schätz, 2010. "Macroeconomic Effects on Emerging Market Sector Indices," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(2), pages 131-169, August.
    11. Aziz, Abdul & Masih, Mansur, 2018. "Lead-lag relationship between macroeconomic variables and stock market: evidence from Korea," MPRA Paper 99894, University Library of Munich, Germany.
    12. Moayad H. Al Rasasi, 2020. "Assessing the Stability of Money Demand Function in Saudi Arabia," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 6(2), pages 22-28, 02-2020.
    13. Zakaria, Khairuddin & Masih, Mansur, 2017. "Impact of various islamic equity markets on sharia (islamic) compliant equity invesments in emerging markets," MPRA Paper 103799, University Library of Munich, Germany.
    14. Pooja Joshi & Arun Kumar Giri, 2015. "Fiscal Deficits and Stock Prices in India: Empirical Evidence," IJFS, MDPI, vol. 3(3), pages 1-18, August.
    15. Subrata ROY, 2020. "Foreign trade policy and economic growth: Indian evidence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 107-126, Autumn.
    16. Ahmad, Syafiq & Masih, Mansur, 2018. "The lead-lag relationship between industrial production and international trade: Malaysian evidence," MPRA Paper 114290, University Library of Munich, Germany.
    17. R. Ratneswary V. Rasiah, 2010. "Macroeconomic Activity And The Malaysian Stock Market: Empirical Evidence Of Dynamic Relations," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(2), pages 59-69.
    18. Fakhri J. Hasanov & Moayad H. Al Rasasi & Salah S. Alsayaary & Ziyadh Alfawzan, 2022. "Money demand under a fixed exchange rate regime: the case of Saudi Arabia," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 385-411, December.
    19. Helmi Hamdi & Rashid Sbia & Bedri Kamil Onur Tas, 2014. "Financial Deepening and Economic Growth in Gulf Cooperation Council Countries," International Economic Journal, Taylor & Francis Journals, vol. 28(3), pages 459-473, September.
    20. Lin, Jeng-Bau & Fu, Shan-Heng, 2016. "Investigating the dynamic relationships between equity markets and currency markets," Journal of Business Research, Elsevier, vol. 69(6), pages 2193-2198.

    More about this item

    Keywords

    Islamic stock; interest rate; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:101190. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.