Causal Relationship between Macro-Economic Indicators and Funds Unit Prices Behavior: Evidence from Malaysian Islamic Equity Unit Trust Funds Industry
In this study, attempt has been made to investigate the
relationship specifically the causal relation between fund unit prices
of Islamic equity unit trust fund which measure by fund NAV and the
selected macro-economic variables of Malaysian economy by using
VECM causality test and Granger causality test. Monthly data has
been used from Jan, 2006 to Dec, 2012 for all the variables. The
findings of the study showed that industrial production index,
political election and financial crisis are the only variables having
unidirectional causal relationship with fund unit price. However the
global oil price is having bidirectional causality with fund NAV.
Thus, it is concluded that the equity unit trust fund industry in
Malaysia is an inefficient market with respect to the industrial
production index, global oil prices, political election and financial
crisis. However the market is approaching towards informational
efficiency at least with respect to four macroeconomic variables,
treasury bill rate, money supply, foreign exchange rate, and
corruption index.
[1] S. Acikalin, R. Aktas, and S. Unal, “Relationships between Stock
Markets and Macroeconomic Variables: An Empirical Analysis of the
Istanbul Stock Exchange”, Investment Management and Financial
Innovations, 2008, 5(1), 8-16.
[2] H. Altın, and E. Sahin, “Macroeconomic Effects on Stock Markets: An
Empirical Analysis for Developed, Emerging and Financial Suffering
Countries”, Middle Eastern Finance and Economics, 2011, (13), 71-89.
[3] D. Asteriou, and S. G. Hall, Applied Econometrics "A modern Approach
Using Eviews and Microfit". U.S.A: Palgrave Macmillan, 2006.
[4] H. A. Bekhet, and N. Y. M. Yusop, “Assessing the Relationship between
Oil Prices, Energy Consumption and Macroeconomic Performance in
Malaysia: Co-integration and Vector Error Correction Model (VECM)
Approach”, International Business Research, 2009, 2(3), 152- 175.
[5] J. R. Booth, and L. C. Booth, “Is Presidential Cycle in Security Returns
Merely Areflection of Business Conditions?” Review of Financial
Economics, 2003, 12, 131-159.
[6] P. T. Brandt, and J. T. Williams, Multiple Time Series Models
"Quantitative Applications in the Social Sciences", London: Sage
Publications Ltd. 2006.
[7] A. Büyüksalvarci, “The Effects of Macroeconomics Variables on Stock
Returns: Evidence from Turkey”. European Journal of Social Sciences,
2010, 14(3), 404-416.
[8] K. Chaudhuri, and S. Smiles, “Stock Market and Aggregate Economic
Activity: Evidence from Australia”. Applied Financial Economics, 2004,
14(2), 121-129.
[9] N. F. Chen, R. Richard and A. Stephen “Ross Economic Forces and the
Stock Market”. Journal of Business, 1986. 59, 383-403.
[10] M. K. Dewi, and I. R. Ferdian, Evaluating Performance of Islamic
Mutual funds in Indonesia and Malaysia. Master thesis, International
Islamic University Malaysia, 2008.
[11] D. Dickey, and W. Fuller, “Distributions of the Estimators for
Autoregressive Time Series with a Unit Root”. Journal of the American
Statistical Association, 1979, 75, 427-431.
[12] W. Enders, Applied Econometric Time Series: Third Edition, John Wiley
& Sons Inc, New York, 2010.
[13] R. F. Engle, and C. W. J. Granger, “Cointegration and Error Correction:
Representation Estimation and Testing. Econometric”, 1987, 55, 251-
276.
[14] E. F. Fama, “Stock returns, real Activity, inflation and money”. The
American Economic Review, 1981. 71(4), 45-565.
[15] E. F. Fama, “Stock returns, expected returns and real activity”. Journal
of Finance, 1990, 45(4), 1089-1108.
[16] E.F. Famma, and L. French, “Business conditions and expected prices
on stocks and bonds”. J. Fin. Econ. 1989, 25, 23-49.
[17] C. W. J. Granger, “Investigating Causal Relations by Econometric
Models and Cross Spectral Methods”. Econometrica, 1969, (37), 428-
438.
[18] N. Günsel, and S. Çukur, “The Effects of Macroeconomic Factors on the
London Stock Returns: A Sectorial Approach”. International Research
Journal of Finance and Economics, 2007, (10), 140-152.
[19] M. Y. M. Hussin, F. Muhammad, M. F. A. Hussi, and A. A. Razak “The
Relationship between Oil Price, Exchange Rate and Islamic Stock
Market in Malaysia”. Research Journal of Finance and Accounting,
2012, 3(5), 83-92.
[20] M. Y. M. Hussin, F. Muhammad, K. Noordin, N. F. Marwan, and A. A.
Razak, “The Impact of Oil Price Shocks on Islamic Financial Market in
Malaysia”. Labuan e-Journal of Muamalat and Society, 2012, 6, 1-13.
[21] M. Ibrahim, and P. P. Aziz, “Macroeconomic Variables and the
Malaysian Equity Market: A View through Rolling Subsamples”.
Journal of Economic Studies, 2003, 30 (1), 6- 27.
[22] M. Ibrahim, “Macroeconomic Variables and Stock Prices in Malaysia:
An Empirical Analysis”. Asian Economic Journal, 1999, 13 (2), 219-
231.
[23] N. A. Jalil, G. M. Ghani, and J. Duasa, “Oil Prices and the Malaysia
Economy”. International Review of Business Research Papers, 2009,
5(4), 232-256.
[24] S. Johansen, and K. Juselius, “Maximum Likelihood Estimation and
Inference on Cointegration-With Applications to the Demand for
Money”. Oxford Bulletin of Economics & Statistics, 1990, 52(2), 169-
210.
[25] A. D. Junkans, and J. P. Estes, Elections and the Market: Are They
Related? Wells Fargo Quick Market Update, 2007.
http://moneyover55.about.com/od/howtoinvest/a/electionmarket.htm.
[26] S. Kamil, The Malaysian Islamic Unit Trust Performance during the
Global Financial Crisis.Master thesis, International Islamic University
Malaysia, 2010.
[27] J. K. M. Kuwornu, “Macroeconomic Variables and Stock Market
Returns: Full Information Maximum Likelihood Estimation”. Research
Journal of Finance and Accounting, 2011, 2(4), 49-63.
[28] D. KwiatkowskI, P. C. B. Phillips, T. P. Schmid, and Y. Shin, “Testing
the Null Hypothesis of Stationarity against the Alternative of a Unit
Root”. Journal of Econometrics,1992, 54, 159-178.
[29] A. Lahrech, “The Impacts of US and Canadian Fundamentals on
Canadian Stock Market”. Journal of Money, Investment and Banking,
2009, (7), 59-74.
[30] A. W. Lo, and A. C. MacKinlay, “Stock Market Prices Do Not Follow
Random Walks: Evidence from A Simple Specification Test”. Review of
Financial Studies, 1988, 1, 41-66.
[31] H. Lütkepohl, New Introduction to Multiple Time Series Analysis.
Springer: Berlin, 2005.
[32] W. M. W. Mahmood, and N. M. Dinniah, “Stock Returns and
Macroeconomics Variables: Evidence from the Six Asian-Pacific
Countries”. International Research Journal of Finance and Economics,
2009, (30), 154-164.
[33] R. C. Maysami, L. C. Howe, and M. A. Hamzah, “Relationship between
Macroeconomic Variables and Stock Market Indices: Cointegration
Evidence from Stock Exchange of Singapore’s All-S Sector Indices”.
Jurnal Pengurusan, 2004, (24), 47-77.
[34] K. Govindarajan, S. Balachandran, V. V. Anand, and R. Vijesh, “A
Study on Profit Maximisation in a Volatile Stock Market”, International
Research Journal of Finance and Economics, 2012, 94 (7), 91-102.
[35] H. W. Mun, E. C. Siong, and T. C. Thing, “Stock Market and Economic
Growth in Malaysia: Causality Test”. . Asian Social Science, 2008, 4 (4),
86- 92.
[36] P. C. B. Phillips, and P. Perron, “Testing for a Unit Root in Time Series
Regression”, Biometrika, 1988, 75, 335-346.
[37] A. A. Rahman, N. Z. M. Sidek, and F. H. Tafri, “Macroeconomic
Determinants of Malaysian Stock Market”. African Journal of Business
Management, 2009, 3 (3), 095-106.
[38] N. Rasool, M. Fayyaz, and M. Mumtaz, “The Impact of Macroeconomic
Variables on Stock Prices: An Empirical Analysis of Karachi Stock
Exchange”. Mediterranean Journal of Social Sciences, 2012, 3(3), 295-
312.
[39] M. J. Seiler, Performing Financial Studyies "A methodlological
Cookbook". U.S.A: Upper Saddle River, New Jersey: Pearson
Education, Inc, 2004.
[40] D. Singh, “Causal Relationship between Macro-Economic Variables and
Stock Market: A Case Study for India”. Pakistan Journal of Social
Sciences (PJSS), 2010, 30(2), 263-274.
[41] A. Humpe, and P. MacmillanCan Macroeconomic Variables Explain
long term Stock Market Movements? A comparison of the US and
Japan: University of St Andrews. Centre for dynamic macroeconomic
analysis working paper series cdma07/20, 2007. Retrieved on December
12, 2012. http://www.st-andrews.ac.uk/economics/CDMA/papers/
wp0720.pdf.
[42] G. Goswami, and S.-C. Jung, Stock Market and Economic Forces:
Evidence from Korea. Fordham University and Chonnam National
University, 1997. Retrieved on November 16, 2012.
http://www.bnet.fordham.edu/goswami/korea.pdf.
[1] S. Acikalin, R. Aktas, and S. Unal, “Relationships between Stock
Markets and Macroeconomic Variables: An Empirical Analysis of the
Istanbul Stock Exchange”, Investment Management and Financial
Innovations, 2008, 5(1), 8-16.
[2] H. Altın, and E. Sahin, “Macroeconomic Effects on Stock Markets: An
Empirical Analysis for Developed, Emerging and Financial Suffering
Countries”, Middle Eastern Finance and Economics, 2011, (13), 71-89.
[3] D. Asteriou, and S. G. Hall, Applied Econometrics "A modern Approach
Using Eviews and Microfit". U.S.A: Palgrave Macmillan, 2006.
[4] H. A. Bekhet, and N. Y. M. Yusop, “Assessing the Relationship between
Oil Prices, Energy Consumption and Macroeconomic Performance in
Malaysia: Co-integration and Vector Error Correction Model (VECM)
Approach”, International Business Research, 2009, 2(3), 152- 175.
[5] J. R. Booth, and L. C. Booth, “Is Presidential Cycle in Security Returns
Merely Areflection of Business Conditions?” Review of Financial
Economics, 2003, 12, 131-159.
[6] P. T. Brandt, and J. T. Williams, Multiple Time Series Models
"Quantitative Applications in the Social Sciences", London: Sage
Publications Ltd. 2006.
[7] A. Büyüksalvarci, “The Effects of Macroeconomics Variables on Stock
Returns: Evidence from Turkey”. European Journal of Social Sciences,
2010, 14(3), 404-416.
[8] K. Chaudhuri, and S. Smiles, “Stock Market and Aggregate Economic
Activity: Evidence from Australia”. Applied Financial Economics, 2004,
14(2), 121-129.
[9] N. F. Chen, R. Richard and A. Stephen “Ross Economic Forces and the
Stock Market”. Journal of Business, 1986. 59, 383-403.
[10] M. K. Dewi, and I. R. Ferdian, Evaluating Performance of Islamic
Mutual funds in Indonesia and Malaysia. Master thesis, International
Islamic University Malaysia, 2008.
[11] D. Dickey, and W. Fuller, “Distributions of the Estimators for
Autoregressive Time Series with a Unit Root”. Journal of the American
Statistical Association, 1979, 75, 427-431.
[12] W. Enders, Applied Econometric Time Series: Third Edition, John Wiley
& Sons Inc, New York, 2010.
[13] R. F. Engle, and C. W. J. Granger, “Cointegration and Error Correction:
Representation Estimation and Testing. Econometric”, 1987, 55, 251-
276.
[14] E. F. Fama, “Stock returns, real Activity, inflation and money”. The
American Economic Review, 1981. 71(4), 45-565.
[15] E. F. Fama, “Stock returns, expected returns and real activity”. Journal
of Finance, 1990, 45(4), 1089-1108.
[16] E.F. Famma, and L. French, “Business conditions and expected prices
on stocks and bonds”. J. Fin. Econ. 1989, 25, 23-49.
[17] C. W. J. Granger, “Investigating Causal Relations by Econometric
Models and Cross Spectral Methods”. Econometrica, 1969, (37), 428-
438.
[18] N. Günsel, and S. Çukur, “The Effects of Macroeconomic Factors on the
London Stock Returns: A Sectorial Approach”. International Research
Journal of Finance and Economics, 2007, (10), 140-152.
[19] M. Y. M. Hussin, F. Muhammad, M. F. A. Hussi, and A. A. Razak “The
Relationship between Oil Price, Exchange Rate and Islamic Stock
Market in Malaysia”. Research Journal of Finance and Accounting,
2012, 3(5), 83-92.
[20] M. Y. M. Hussin, F. Muhammad, K. Noordin, N. F. Marwan, and A. A.
Razak, “The Impact of Oil Price Shocks on Islamic Financial Market in
Malaysia”. Labuan e-Journal of Muamalat and Society, 2012, 6, 1-13.
[21] M. Ibrahim, and P. P. Aziz, “Macroeconomic Variables and the
Malaysian Equity Market: A View through Rolling Subsamples”.
Journal of Economic Studies, 2003, 30 (1), 6- 27.
[22] M. Ibrahim, “Macroeconomic Variables and Stock Prices in Malaysia:
An Empirical Analysis”. Asian Economic Journal, 1999, 13 (2), 219-
231.
[23] N. A. Jalil, G. M. Ghani, and J. Duasa, “Oil Prices and the Malaysia
Economy”. International Review of Business Research Papers, 2009,
5(4), 232-256.
[24] S. Johansen, and K. Juselius, “Maximum Likelihood Estimation and
Inference on Cointegration-With Applications to the Demand for
Money”. Oxford Bulletin of Economics & Statistics, 1990, 52(2), 169-
210.
[25] A. D. Junkans, and J. P. Estes, Elections and the Market: Are They
Related? Wells Fargo Quick Market Update, 2007.
http://moneyover55.about.com/od/howtoinvest/a/electionmarket.htm.
[26] S. Kamil, The Malaysian Islamic Unit Trust Performance during the
Global Financial Crisis.Master thesis, International Islamic University
Malaysia, 2010.
[27] J. K. M. Kuwornu, “Macroeconomic Variables and Stock Market
Returns: Full Information Maximum Likelihood Estimation”. Research
Journal of Finance and Accounting, 2011, 2(4), 49-63.
[28] D. KwiatkowskI, P. C. B. Phillips, T. P. Schmid, and Y. Shin, “Testing
the Null Hypothesis of Stationarity against the Alternative of a Unit
Root”. Journal of Econometrics,1992, 54, 159-178.
[29] A. Lahrech, “The Impacts of US and Canadian Fundamentals on
Canadian Stock Market”. Journal of Money, Investment and Banking,
2009, (7), 59-74.
[30] A. W. Lo, and A. C. MacKinlay, “Stock Market Prices Do Not Follow
Random Walks: Evidence from A Simple Specification Test”. Review of
Financial Studies, 1988, 1, 41-66.
[31] H. Lütkepohl, New Introduction to Multiple Time Series Analysis.
Springer: Berlin, 2005.
[32] W. M. W. Mahmood, and N. M. Dinniah, “Stock Returns and
Macroeconomics Variables: Evidence from the Six Asian-Pacific
Countries”. International Research Journal of Finance and Economics,
2009, (30), 154-164.
[33] R. C. Maysami, L. C. Howe, and M. A. Hamzah, “Relationship between
Macroeconomic Variables and Stock Market Indices: Cointegration
Evidence from Stock Exchange of Singapore’s All-S Sector Indices”.
Jurnal Pengurusan, 2004, (24), 47-77.
[34] K. Govindarajan, S. Balachandran, V. V. Anand, and R. Vijesh, “A
Study on Profit Maximisation in a Volatile Stock Market”, International
Research Journal of Finance and Economics, 2012, 94 (7), 91-102.
[35] H. W. Mun, E. C. Siong, and T. C. Thing, “Stock Market and Economic
Growth in Malaysia: Causality Test”. . Asian Social Science, 2008, 4 (4),
86- 92.
[36] P. C. B. Phillips, and P. Perron, “Testing for a Unit Root in Time Series
Regression”, Biometrika, 1988, 75, 335-346.
[37] A. A. Rahman, N. Z. M. Sidek, and F. H. Tafri, “Macroeconomic
Determinants of Malaysian Stock Market”. African Journal of Business
Management, 2009, 3 (3), 095-106.
[38] N. Rasool, M. Fayyaz, and M. Mumtaz, “The Impact of Macroeconomic
Variables on Stock Prices: An Empirical Analysis of Karachi Stock
Exchange”. Mediterranean Journal of Social Sciences, 2012, 3(3), 295-
312.
[39] M. J. Seiler, Performing Financial Studyies "A methodlological
Cookbook". U.S.A: Upper Saddle River, New Jersey: Pearson
Education, Inc, 2004.
[40] D. Singh, “Causal Relationship between Macro-Economic Variables and
Stock Market: A Case Study for India”. Pakistan Journal of Social
Sciences (PJSS), 2010, 30(2), 263-274.
[41] A. Humpe, and P. MacmillanCan Macroeconomic Variables Explain
long term Stock Market Movements? A comparison of the US and
Japan: University of St Andrews. Centre for dynamic macroeconomic
analysis working paper series cdma07/20, 2007. Retrieved on December
12, 2012. http://www.st-andrews.ac.uk/economics/CDMA/papers/
wp0720.pdf.
[42] G. Goswami, and S.-C. Jung, Stock Market and Economic Forces:
Evidence from Korea. Fordham University and Chonnam National
University, 1997. Retrieved on November 16, 2012.
http://www.bnet.fordham.edu/goswami/korea.pdf.
@article{"International Journal of Business, Human and Social Sciences:68832", author = "Anwar Hasan Abdullah Othman and Ahamed Kameel and Hasanuddeen Abdul Aziz", title = "Causal Relationship between Macro-Economic Indicators and Funds Unit Prices Behavior: Evidence from Malaysian Islamic Equity Unit Trust Funds Industry", abstract = "In this study, attempt has been made to investigate the
relationship specifically the causal relation between fund unit prices
of Islamic equity unit trust fund which measure by fund NAV and the
selected macro-economic variables of Malaysian economy by using
VECM causality test and Granger causality test. Monthly data has
been used from Jan, 2006 to Dec, 2012 for all the variables. The
findings of the study showed that industrial production index,
political election and financial crisis are the only variables having
unidirectional causal relationship with fund unit price. However the
global oil price is having bidirectional causality with fund NAV.
Thus, it is concluded that the equity unit trust fund industry in
Malaysia is an inefficient market with respect to the industrial
production index, global oil prices, political election and financial
crisis. However the market is approaching towards informational
efficiency at least with respect to four macroeconomic variables,
treasury bill rate, money supply, foreign exchange rate, and
corruption index.
", keywords = "Fund unit price, unit trust industry, Malaysia,
macroeconomic variables, causality.", volume = "9", number = "1", pages = "185-9", }
