Determinants of stock market returns in Malaysia: evidence from FTSE KLCI / Muhammad Fadzli Kadir

The stock market was one of indicators in determining the future economy of a country. Bearish in the stock market refers to there is unfavourable signal to the economy while bullish in the stock market refers to there is positive outlook in future economy of a country. The trend of the major stock market index gives a perception to local and foreign direct portfolio investment towards a county and determining the determinants of stock market returns will help them in making investment decisions. This study highlighted the significant determinants in determining future movements of stock market returns in Malaysia. The quarterly time series data span over the period of the first quarter of 2008 to the first quarter of 2017 was used for this study.

This study employed the Ordinary Least Squared (OLS) approach to testify all the research objectives by employing FTSE KLCI as the proxy for stock market returns in Malaysia. The trend for FTSE KLCI had been fluctuated since Global Financial Crisis 2008. The research objectives focused on testing the selected determinants of stock market returns in Malaysia such as exchange rate of Malaysia ringgit to 1 U.S. dollar (USD/MYR), Gross Domestic Product (GDP) in millions Malaysia ringgit, interest rate proxied by Malaysia Treasury Bill Band 4 (68 to 91 days to maturity) and crude oil price proxied by Crude Oil West Texas Intermediate (WTI) spot cushing U.S. dollar per barrel. It was revealed that the exchange rate, the GDP and the interest rate had significant impact in determining stock market returns in Malaysia.