Revisiting relationship between Malaysian stock market index and selected macroeconomic variables using asymmetric cointegration

Hakimah Nur Ahmad Hamidi, Norlin Khalid, Zulkefly Abdul Karim

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This article re-examines the relationship of several macroeconomics variables with Malaysia Stock Market Index, KLCI. The paper applies Johansen (1988) procedure and vector error correction model (VECM) for symmetric cointegration, while threshold cointegration test proposed by Enders and Siklos (2001) is used for asymmetric cointegration. Using quarterly time series data set spanning from 1990 to 2015, the findings show the presence of the long-run relationship between KLCI and the macroeconomics variable i.e., industrial production index, inflation rate, exchange rate and money supply. We also found evidence for asymmetric adjustment of the stock price index towards its long-run values. These results have particularly important policy implications, concerning the formulation of macroeconomic policy to achieve financial stability and thus contribute to the further development of Malaysian Stock Market Index.

Original languageEnglish
Pages (from-to)341-350
Number of pages10
JournalJurnal Ekonomi Malaysia
Volume52
Issue number1
Publication statusPublished - 1 Jan 2018

Fingerprint

Stock market index
Cointegration
Macroeconomic variables
Money supply
Macroeconomic policy
Industrial production
Time series data
Policy implications
Inflation rate
Threshold cointegration
Cointegration test
Johansen procedure
Financial stability
Price index
Malaysia
Stock prices
Asymmetric adjustment
Exchange rates
Vector error correction model
Long-run relationship

Keywords

  • Asymmetric cointegration
  • Macroeconomic variables
  • Stock market index

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

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N2 - This article re-examines the relationship of several macroeconomics variables with Malaysia Stock Market Index, KLCI. The paper applies Johansen (1988) procedure and vector error correction model (VECM) for symmetric cointegration, while threshold cointegration test proposed by Enders and Siklos (2001) is used for asymmetric cointegration. Using quarterly time series data set spanning from 1990 to 2015, the findings show the presence of the long-run relationship between KLCI and the macroeconomics variable i.e., industrial production index, inflation rate, exchange rate and money supply. We also found evidence for asymmetric adjustment of the stock price index towards its long-run values. These results have particularly important policy implications, concerning the formulation of macroeconomic policy to achieve financial stability and thus contribute to the further development of Malaysian Stock Market Index.

AB - This article re-examines the relationship of several macroeconomics variables with Malaysia Stock Market Index, KLCI. The paper applies Johansen (1988) procedure and vector error correction model (VECM) for symmetric cointegration, while threshold cointegration test proposed by Enders and Siklos (2001) is used for asymmetric cointegration. Using quarterly time series data set spanning from 1990 to 2015, the findings show the presence of the long-run relationship between KLCI and the macroeconomics variable i.e., industrial production index, inflation rate, exchange rate and money supply. We also found evidence for asymmetric adjustment of the stock price index towards its long-run values. These results have particularly important policy implications, concerning the formulation of macroeconomic policy to achieve financial stability and thus contribute to the further development of Malaysian Stock Market Index.

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