Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model

Purpose – The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period. Design/methodology/approach – The paper employs the latest estimation technique of autoregressive distributed...

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Main Authors:	Abd Majid, M. Shabri, Mohd Yusof, Rosylin
Format:	Article
Language:	English
Published:	Emerald Group Publishing 2009
Subjects:	HG Finance
Online Access:	http://irep.iium.edu.my/10017/ http://irep.iium.edu.my/10017/1/Long-run_relationship_between_Islamic_stock_returns_and_macroeconomic_variables_An_application_of_the_autoregressive_distributed_lag_model.pdf

id	iium-10017
recordtype	eprints
spelling	iium-100172012-01-31T04:21:07Z http://irep.iium.edu.my/10017/ Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model Abd Majid, M. Shabri Mohd Yusof, Rosylin HG Finance Purpose – The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period. Design/methodology/approach – The paper employs the latest estimation technique of autoregressive distributed lag (ARDL) model approach to cointegration. Findings – The results suggest that real effective exchange rate, money supply M3, treasury bill rate (TBR) and federal fund rate (FFR) seem to be suitable targets for the government to focus on, in order to stabilize the Islamic stock market and to encourage more capital flows into the market. As for the interest rates and stock returns relationship, the paper finds that when interest rates rise either domestically (TBR) or internationally (FFR), the Muslim investors will buy more Shari’ah compliant stocks; thereby escalating the Islamic stock prices. Research limitations/implications – The results of this study are limited to the post 1997 financial crisis period until the beginning of the year 2006 for a small open economy, Malaysia. Practical implications – The paper reveals that both changes in the local monetary policy variables and in the US monetary policy as measured by the changes in the FFR have a significant direct impact on the Islamic stock market behavior in Malaysia. Originality/value – The paper adopts the latest time series econometrics technique to test for cointegration, ARDL. And it is among the earliest attempts to investigate the long-run effects of the macroeconomic variables changes either domestically or internationally on the Islamic stock market. Emerald Group Publishing 2009 Article PeerReviewed application/pdf en http://irep.iium.edu.my/10017/1/Long-run_relationship_between_Islamic_stock_returns_and_macroeconomic_variables_An_application_of_the_autoregressive_distributed_lag_model.pdf Abd Majid, M. Shabri and Mohd Yusof, Rosylin (2009) Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model. Humanomics, International Journal of System and Ethics, 25 (2). pp. 127-141. ISSN 0828-8666
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG Finance
spellingShingle	HG Finance Abd Majid, M. Shabri Mohd Yusof, Rosylin Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
description	Purpose – The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period. Design/methodology/approach – The paper employs the latest estimation technique of autoregressive distributed lag (ARDL) model approach to cointegration. Findings – The results suggest that real effective exchange rate, money supply M3, treasury bill rate (TBR) and federal fund rate (FFR) seem to be suitable targets for the government to focus on, in order to stabilize the Islamic stock market and to encourage more capital flows into the market. As for the interest rates and stock returns relationship, the paper finds that when interest rates rise either domestically (TBR) or internationally (FFR), the Muslim investors will buy more Shari’ah compliant stocks; thereby escalating the Islamic stock prices. Research limitations/implications – The results of this study are limited to the post 1997 financial crisis period until the beginning of the year 2006 for a small open economy, Malaysia. Practical implications – The paper reveals that both changes in the local monetary policy variables and in the US monetary policy as measured by the changes in the FFR have a significant direct impact on the Islamic stock market behavior in Malaysia. Originality/value – The paper adopts the latest time series econometrics technique to test for cointegration, ARDL. And it is among the earliest attempts to investigate the long-run effects of the macroeconomic variables changes either domestically or internationally on the Islamic stock market.
format	Article
author	Abd Majid, M. Shabri Mohd Yusof, Rosylin
author_facet	Abd Majid, M. Shabri Mohd Yusof, Rosylin
author_sort	Abd Majid, M. Shabri
title	Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
title_short	Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
title_full	Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
title_fullStr	Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
title_full_unstemmed	Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model
title_sort	long-run relationship between islamic stocks returns and macroeconomic variables: an application of the autoregressive distributed lag model
publisher	Emerald Group Publishing
publishDate	2009
url	http://irep.iium.edu.my/10017/ http://irep.iium.edu.my/10017/1/Long-run_relationship_between_Islamic_stock_returns_and_macroeconomic_variables_An_application_of_the_autoregressive_distributed_lag_model.pdf
first_indexed	2023-09-18T20:19:32Z
last_indexed	2023-09-18T20:19:32Z
_version_	1777408013457424384

Long-run relationship between Islamic stocks returns and macroeconomic variables: An application of the autoregressive distributed lag model

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