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Nexus between Oil Price and Stock Performance of Power Industry in Malaysia

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  • Puah, Chin-Hong
  • Tan, Lay-Phin
  • Md Isa, Abu Hassan

Abstract

This paper examines the reaction of KLCI and five major power sector stocks listed on Bursa Malaysia to the changes in the world spot oil price using cointegration technique and impulse response analysis. Results indicate the existence of a long run positive relationship of world spot oil price with the stock returns of KLCI, TENAGA, TANJONG and YTLP. The impulse response analysis further shows that, in most of the cases, the oil price shock has only an impact on the short time horizon. As Malaysia is a net oil exporting country practicing oil and gas subsidization, the oil price shocks lead to the wealth transfer effect from oil importing to oil exporting countries, thus, confer a positive impact on the stock market.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31757.

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Date of creation: Dec 2009
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Handle: RePEc:pra:mprapa:31757

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Keywords: Stock market; Power industry; Oil price;

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  12. Faff, Robert W. & Brailsford, Timothy J., 1999. "Oil price risk and the Australian stock market," Journal of Energy Finance & Development, Elsevier, vol. 4(1), pages 69-87, 06.
  13. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
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  16. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
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