Revisiting Relationship Between Malaysian Stock Market Index and Selected Macroeconomic Variables Using Asymmetric Cointegration

Hakimah Nur Ahmad Hamidi (), Norlin Khalid () and Zulkefly Abdul Karim ()
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Hakimah Nur Ahmad Hamidi: Fakulti Ekonomi dan Pengurusan Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor MALAYSIA
Norlin Khalid: Fakulti Ekonomi dan Pengurusan Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor MALAYSIA
Zulkefly Abdul Karim: Fakulti Ekonomi dan Pengurusan Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor MALAYSIA

Jurnal Ekonomi Malaysia, 2018, vol. 52, issue 1, 311-319

Abstract: This article re-examines the relationship of several macroeconomics variables with Malaysia Stock Market Index, KLCI. The paper applies Johansen (1988) procedure and vector error correction model (VECM) for symmetric cointegration, while threshold cointegration test proposed by Enders and Siklos (2001) is used for asymmetric cointegration. Using quarterly time series data set spanning from 1990 to 2015, the findings show the presence of the long-run relationship between KLCI and the macroeconomics variable i.e., industrial production index, inflation rate, exchange rate and money supply. We also found evidence for asymmetric adjustment of the stock price index towards its long-run values. These results have particularly important policy implications, concerning the formulation of macroeconomic policy to achieve financial stability and thus contribute to the further development of Malaysian Stock Market Index.

Keywords: Asymmetric cointegration; macroeconomic variables; stock market index (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ukm:jlekon:v:52:y:2018:i:1:p:311-319

DOI: 10.17576/JEM-2018-5201-25

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