The relationship between islamic stock prices and selected macroeconomic variables

Ali, Siti Mariam and Abdul Karim, Bakri (2011) The relationship between islamic stock prices and selected macroeconomic variables. [Research Reports] (Unpublished)
Abstract

This study examine the long-run and short-run dynamic interactions among macroeconomic variables and Islamic stock prices for the Malaysian case using time series techniques of cointegration and Vector Autoregression. The study reveals that the macroeconomic variables are cointegrated with the stock prices, suggesting potential inefficiency in the long-run. We observe that variations in Kuala Lumpur Shari 'ah Index (KLSI) are predominantly attributed to its own innovations, Price Level (CPI) and Money Supply (MS) variations. The money supply exerts a positive effect on the stock prices in both long- and short-run, while the price level exerts a negative effect on the stock prices. The negative association between KLSI and CPI seems does not support the view that the stock prices are good hedge against inflation. In addition, we also note the importance of the Malaysian exchange rate to variations in Malaysian in Malaysian macroeconomic performances.

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