Stock market and real activity : an empirical study of several Asian countries / Masturah Ma'in, Arifin Md. Salleh and Abd. Ghafar Ismail

The objective ofthis study is to investigate the performance ofthe stock market
as an indicator to real activity. The evidence ofthis relationship will focus on
the sample of data obtained from Malaysia, Japan, Australia, India and
Pakistan. The ordinary least square (OLS) and ECM-causality are used to
examine the cointegration relationship and causality effect through the sample
of data frequency to the related countries. The results show that there is
causal-link between stock returns and industrial production index. This
particularly exists in Australia, Japan and Malaysia. However, in Pakistan
and India, there are no effects traced Therefore, based on the empirical
evidence, it clearly shows that the stock market does not predict the real
activity in all Asian countries compared to the developed countries in which
their stock markets play an important role in predicting the real activity.