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Granger-causality between palm oil, gold and stocks (islamic and conventional): Malaysian evidence based on ARDL approach

Othman, Nurhuda and Masih, Mansur (2018): Granger-causality between palm oil, gold and stocks (islamic and conventional): Malaysian evidence based on ARDL approach.

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Abstract

This paper aims to ascertain the Granger-causality between Malaysian strategic commodities (namely palm oil and gold prices) and stock markets (both conventional and Islamic) using an ARDL or ‘Bounds Test’ The variables involved in this research are Crude Palm Oil Price Malaysia (POM), Kijang Emas / Gold Price (KE), FTSE Bursa Malaysia KLCI (CI) and FTSE Bursa Malaysia Emas Shariah Index (BMES). The empirical results tend to indicate that Kijang Emas / Gold Price (KE) being the most exogenous leads the changes followed by crude palm oil price, FTSE Bursa Malaysia KLCI (CI) and FTSE Bursa Malaysia Emas Shariah Index (BMES) which is the most endogenous. We found there are causalities between stock price and palm oil price. We also note, there are significant relationships between the variables in the long run with a strong causal link between FTSE Bursa Malaysia EMAS Shariah Index and FTSE Bursa Malaysia KLCI.

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