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A study of share market dynamics in Malaysia

Kan, Y. Y. and Lim, G. C. (2011) A study of share market dynamics in Malaysia. Southern College Academic Journal, 7. pp. 73-112. ISSN 1823-5522

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This paper examines the long-run relationships and short-run dynamic interactions between stock prices and macroeconomics variables in Malaysia over the period 1990-2010 by employing multivariate cointegration techniques and vector error correction model. The results of cointegration tests suggest that share prices in Malaysia generally display a long-run equilibrium relationship with inflation rate, exchange rate, industrial production, average lending rate, growth of money supply, oil price and US share price. A contemporaneous error correction model has stronger explanatory power than a model with lag variables in explaining short-term relationship. As for short-run dynamic interaction, we find exchange rate, average lending rate, US share price exhibit causal relationships with share price and these variables are significant in explaining share price movement.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
University of Reading Malaysia
ID Code:71248
Publisher:Southern College

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