Is islamic stock market affected by interest rates ? Malaysia as a case study

Daqane, Mohamed Qalib and Masih, Mansur (2016): Is islamic stock market affected by interest rates ? Malaysia as a case study.

Abstract

This research makes an attempt to discuss the relationship between interest rate and Islamic stock market in Malaysia along with other theoretical determinants. We use vector error correction model and variance decompositions techniques including the recently developed long-run structural modeling (LRSM). Malaysia is used as a case study. The variables used in this research are monthly data of Crude oil price (OIL) , foreign exchange rates of Ringgit Malaysia- United States Dollar (MYR), Malaysian lending rate(INT) and Emas shariah index(EMASH). This research tends to indicate that in the short-term the interest rate does affect the Islamic product even though theoretically Islamic finance should not have any connection with the interest rate at all.

• Item Type: MPRA Paper
• Language: English
• Keywords: Shariah(Islamic) stock index, macrovariables, VECM, VDC
• 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

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