The relationship between money supply (M2), inflation rate and industrial production index to stock price in Malaysia / Asimah Nor Darus

This study aims to study the relationship between the money supply using M2, Industrial Production Index (IIP) and Inflation rate using Consumer Price Index (CPI) to the stock price in Malaysia. The main objective of this study is to determine the relationship among the three variables, which have been influencing the stock market prices especially in the Malaysian stock market. In addition, that are many variables that are related to the stock market price performances in Bursa Malaysia for example industrial production, risk premium, slope of the yield curve, inflation, interest rate, exchange rate, money supply and trade balance but for this study it is more preferable to justify only three variables which contribute to the Malaysian stock market. The period of analysis was between 1996 and 2005 in monthly basis. The method used is Multiple Linear Regression Model to analyze the relationship between Money supply (M2), Inflation rate (CPI) and Industrial production index (IIP) to stock price In Malaysia perspective. As for the overall result, it shows that money supply (M2), Industrial production Index (IIP) and the inflation rate (Consumer Price Index) have significant relationship with the Malaysian stock market prices.