Co-Movement between Malaysian Stock Index and Bond Index: Empirical Evidence from Rank Tests for Cointegration

The IUP Journal of Applied Finance, Vol. 18, No. 1, pp. 5-18, January 2012

Posted: 13 Sep 2012

See all articles by Shiok Ye Lim

Shiok Ye Lim

Universiti Malaysia Sabah, Labuan International Campus

Sheue Li Ong

Universiti Malaysia Sabah

Chong Mun Ho

Universiti Malaysia Sabah

Date Written: September 13, 2012

Abstract

This study aims at examining the long-run cointegration relationship for Malaysian stock and bond market indices in the period surrounding the Asian financial crisis based on the Breitung (2001) rank test procedures. The paper argues that the standard cointegration tests do not allow for breaks and lead to the finding of no cointegration. Breitung (2001) rank test was applied which can tackle the problem of breaks and can detect both linear and nonlinear cointegration relationships. For the full period (1994:1 to 2009:9) and sub-period (2000:1 to 2009:9), findings on the co-movement of stock index and bond indices suggest a long-run equilibrium relationship between these indices.

Suggested Citation

Lim, Shiok Ye and Ong, Sheue Li and Ho, Chong Mun, Co-Movement between Malaysian Stock Index and Bond Index: Empirical Evidence from Rank Tests for Cointegration (September 13, 2012). The IUP Journal of Applied Finance, Vol. 18, No. 1, pp. 5-18, January 2012. Available at SSRN: https://ssrn.com/abstract=2145756

Shiok Ye Lim (Contact Author)

Universiti Malaysia Sabah, Labuan International Campus ( email )

Jalan Sungai pagar
Labuan F.T., Labuan F.T. 87000
Malaysia

Sheue Li Ong

Universiti Malaysia Sabah ( email )

P.O. Box 80594
Kota Kinabalu, Sabah 88999
Malaysia

Chong Mun Ho

Universiti Malaysia Sabah ( email )

P.O. Box 80594
Kota Kinabalu, Sabah 88999
Malaysia

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