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Abstract

This paper presents the empirical evidence on the long-run neutrality (LRN) of money in the stock market in Malaysia using seasonal adjusted monthly data from 1978:1 to 1999:12 based on the bivariate ARIMA framework developed by Fisher and Seater (1993). Besides the main stock index, the sectoral stocks indexes also have been tested by different measurements of money supply, namely M1, M2, and M3. Generally, the findings support the LRN of money in Malaysia’s stock market and the results are robust to the sensitivity tests of different monetary aggregates. This would imply that the permanent stochastic changes in money supply do not have influential effect towards the real stock returns in Malaysia.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37676.

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Date of creation: 2006
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Publication status: Published in The ICFAI Journal of Applied Economics 4.V(2006): pp. 15-37
Handle: RePEc:pra:mprapa:37676

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Keywords: Stock markets; Neutrality of money; ARIMA model;

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Find related papers by JEL classification:

• C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
• C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
• E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
• G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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Cited by:

1. Chin-Hong Puah & Muzafar Shah Habibullah & Venus Khim-Sen Liew, 2010. "Is money neutral in stock market? The case of Malaysia," Economics Bulletin, AccessEcon, vol. 30(3), pages 1852-1861.
   
   • Chin-Hong, Puah & Muzafar Shah, Habibullah & Venus Khim-Sen, Liew, 2009. "Is Money Neutral In Stock Market? The Case of Malaysia," MPRA Paper 24017, University Library of Munich, Germany, revised 2010.

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