Impact of Oil Price Fluctuations on Returns of Different Sectors of Malaysian Stock Market

Journal of Modern Accounting and Auditing, Vol. 11, Issue 3, pp. 159-167, 2015

9 Pages Posted: 29 Apr 2015

See all articles by Atousa Jafarian

Atousa Jafarian

University Putra Malaysia, Faculty of Economy and Management, Students

Meysam Safari

SEGi University

Date Written: April 28, 2015

Abstract

Oil price fluctuations affect equity values in North American, European, and Gulf Cooperation Council (GCC) stock markets, as evidenced by prior studies. However, they only focus on market-wide level analysis. This study, through both market level and sector level analyses, examines the sensitivity of Malaysian stock returns to oil price fluctuations over the period from January 2000 to March 2014. A multi-factor market model has been employed to capture this sensitivity. The regression results show a positive impact of oil price changes on the Financial Times Stock Exchange Kuala Lumpur Composite Index (FTSE KLCI) market return. Consumer staples and energy sector index returns were also positively affected by oil price changes. On the other hand, utilities and telecom services were negatively affected over the study period. Moreover, Granger causality analysis was performed to see if oil price fluctuations Granger cause the stock indices to change. With one month lag period, oil price fluctuations Granger cause consumer staple, energy, industrial, and telecommunication services return. Relevant policymakers and market caretakers (Ministry of Finance, Central Bank, and Security Commission) may use the findings of this study to develop and incorporate a preventive mechanism to minimize the unfavorable impacts of oil price fluctuations on different sectors of stock market, and Malaysian economy in general.

Keywords: oil price, stock market, Malaysia, sectoral analysis, market sectors, energy

Suggested Citation

Jafarian, Atousa and Safari, Meysam, Impact of Oil Price Fluctuations on Returns of Different Sectors of Malaysian Stock Market (April 28, 2015). Journal of Modern Accounting and Auditing, Vol. 11, Issue 3, pp. 159-167, 2015. Available at SSRN: https://ssrn.com/abstract=2599955

Atousa Jafarian

University Putra Malaysia, Faculty of Economy and Management, Students ( email )

Serdang
Malaysia

Meysam Safari (Contact Author)

SEGi University ( email )

Taman Sains Selangor,
Kota Damansara, PJU 5,
Petaling Jaya,, Selangor 47810
Malaysia

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