Open AccessRelationship between Macroeconomic Variables and Stock Market: Case Study from Malaysia
Author(s) -
Khong Yeen Lai,
Tang Kin Leong,
Tee Peck Ling
Publication year - 2019
Publication title -
research in economics and management
Language(s) - English
Resource type - Journals
eISSN - 2470-4407
pISSN - 2470-4393
DOI - 10.22158/rem.v4n2p102
Subject(s) - economics , spurious relationship , econometrics , variables , exchange rate , augmented dickey–fuller test , unit root test , granger causality , price index , variable (mathematics) , stock market index , stock market , cointegration , statistics , mathematics , monetary economics , mathematical analysis , paleontology , horse , biology
This study investigate the relationship between macroeconomic variables and FTSE Bursa Malaysia KLCI, the samples are divided into 2 groups such as foreign macroeconomic variables and local macroeconomic variables, foreign macroeconomic variables consist of Gold Bullion LBM price and Dow Jones Index, meanwhile local macroeconomic variables consist of Consumer Price Index, Base Lending Rate, Exchange Rate. This study employs data from Jan 2000 to Dec 2013 which contains a monthly data set of 168 observations. There are 3 methodologies used in this study to investigate the relationship, the first test is Unit Root test which used to test the stationary of each variable, the results indicate that all the variables are stationary in first difference, this is important to use stationary variables because if the variables are not stationary, it might lead to spurious regression. The second methodology is Johansen & Juselius Co-integration test to investigate the long run relationship among these variables, the results show that the foreign macroeconomic variables and local macroeconomic variables have long run relationship with KLCI and significant. Next, this study will investigate the short run relationship between macroeconomic variables and KLCI, the results indicate that Gold, BLR and CPI can granger cause KLCI and significant at 1%, 5% significance level respectively.