Stock returns and macroeconomic factors in an emerging economy: Malaysian evidence

Miras, Hassan and Masih, Mansur (2017): Stock returns and macroeconomic factors in an emerging economy: Malaysian evidence.

Abstract

This paper investigates the relationship between stock returns and macroeconomic variables in an emerging economy. Malaysia is taken as a case study. The evidence based on variance decompositions tends to indicate that interest rate is relatively most exogenous followed by stock returns, while consumer price index has been most endogenous. The findings reveal that all other endogenous variables are highly affected by stock returns. Impulse Response Functions to one standard deviation shock to the equation for Stock Returns and Exchange rate received significant responses from other variables. However, none of the variables reacted to a shock on oil price. The results have strong policy implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: Interest rate, Inflation, Oil price, Industrial production, Stock returns, Money supply, Exchange rate, Malaysia
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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