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Foreign Interest Ratesand the IslamicStock Market Integration between Indonesia and Malaysia

Pasrun Adam (), Ambo Wonua Nusantara () and Abd AzisMuthalib ()
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Ambo Wonua Nusantara: Department of Economics, Universitas Halu Oleo, Kendari, Indonesia.
Abd AzisMuthalib: Department of Economics, Universitas Halu Oleo, Kendari, Indonesia.

Iranian Economic Review (IER), 2017, vol. 21, issue 3, 639-659

Abstract: This study aimed to examine the Islamic stock market integration between Indonesia and Malaysia, and the effect of foreign interest ratesonboth stockmarkets.Thisstudy used the monthly time series of Jakarta Islamic Index, Hijrah Syariah Index, and foreign interest rates within a period from August 2000 to January 2016. Result of cointegration test demonstrates that while there is a cointegration between Jakarta IslamicIndex and Hijrah Shariah Index, no cointegration occurred between Jakarta Islamic Index, Hijrah Shariah Index,and foreign interest rates. Estimation result of the VAR model indicates that there is a long-run relationship between Jakarta Islamic Index and Hijrah Shariah Index, and that there is integration between Indonesian and Malaysian Islamic stock markets. Furthermore,estimation result of the VARX model reveals that foreign interest ratesonly affected Malaysian Islamic stock price index.

Keywords: Stock Market Integration; Foreign Interest Rate; VAR Model; VARX Model. (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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