The effect of oil price fluctuations on the Malaysian and Indonesian stock markets

Abdul Razak Abdul Hadi, Mohamed Hisham Yahya, Abu Hassan Shaari Md Nor

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This study is pursued with the objective of examining the effect of changes in crude oil price on the share prices of public listed companies on Bursa Malaysia and the Jakarta Stock Exchange as proxied by the Kuala Lumpur Composite Index (KLCI) and Jakarta Composite Index (JCI), respectively. The study employs the Engle-Granger Cointegration test and Error Correction Modelling (ECM). Using time series data from January 1986 through December 2006, this study finds a significant long-term relationship between the movement of crude oil price and the performance of the two stock markets. The two observed variables in both stock markets are also found to be positively correlated. The test results from Impulse Response Function and Variance Decomposition show the presence of a dynamic interaction between the movement in crude oil prices and the two stock market indices.

Original languageEnglish
Pages (from-to)69-91
Number of pages23
JournalAsian Journal of Business and Accounting
Volume2
Issue number1-2
Publication statusPublished - 2009

Fingerprint

Oil prices
Stock market
Fluctuations
Crude oil price
Composite index
Variance decomposition
Stock market index
Long-term relationships
Time series data
Modeling
Share prices
Error correction
Cointegration test
Malaysia
Interaction
Listed companies
Stock exchange
Impulse response function

Keywords

  • Engle-granger cointegration test
  • Error correction model
  • Granger causality test
  • Impulse response functions
  • Jakarta composite index
  • Kuala lumpur composite index
  • Variance decomposition technique

ASJC Scopus subject areas

  • Accounting
  • Business and International Management

Cite this

The effect of oil price fluctuations on the Malaysian and Indonesian stock markets. / Hadi, Abdul Razak Abdul; Yahya, Mohamed Hisham; Md Nor, Abu Hassan Shaari.

In: Asian Journal of Business and Accounting, Vol. 2, No. 1-2, 2009, p. 69-91.

Research output: Contribution to journalArticle

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